Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

MINISTRY OF HOUSING AND LOCAL GOVERNMENT PROVISIONAL ORDER (MELTON MOWBRAY) BILL

MINISTRY OF HOUSING AND LOCAL GOVERNMENT PROVISIONAL ORDER (NEWTON-LE-WILLOWS) BILL

MINISTRY OF HOUSING AND LOCAL GOVERNMENT PROVISIONAL ORDER (ROTHERHAM) BILL

Read the Third time and passed.

Oral Answers to Questions — BRITISH GUIANA

Conference

Mr. Fisher: asked the Secretary of State for the Colonies whether he will now announce the date of an independence conference for British Guiana.

Mr. Chapman: asked the Secretary of State for the Colonies when he expects to make further progress towards independence for British Guiana.

The Secretary of State for the Colonies (Mr. Anthony Greenwood): It is the intention of the British Government to hold a conference as early as practicable to discuss, among other things, a programme for independence. Meanwhile we shall be waiting anxiously for the result of the investigation into racial imbalance which the Premier of British Guiana is taking steps to mount.

Mr. Fisher: Would the right hon. Gentleman agree that British Guiana is now enjoying fair and firm government and racial peace for the first time for

many years? Will he convene a conference this autumn to fix a date for independence early next year?

Mr. Greenwood: British Guiana is certainly making very satisfactory progress at present. That is something about which all of us must be very glad indeed, but I would prefer not to commit myself to a precise date for a conference at the moment. There is a good deal of ground to be cleared and we had better see how things develop.

Mr. Chapman: Is not there a danger in an early conference on independence that it might break down again on the issue of an electoral system? Would not such a breakdown be worse than not having a conference at all? Therefore, would not we be well advised to go slowly and firmly forward, trying to clear the ground on this aspect before we have any conference?

Mr. Greenwood: I want to do everything possible in the meantime to ensure that the conference is a success, and I hope that it will not be unduly delayed.

Oral Answers to Questions — COLONIAL TERRITORIES

Trade Unions

Mr. Hamling: asked the Secretary of State for the Colonies to what extent his Department is utilising the services of the Trades Union Congress in the development of trade unions in Colonial Territories.

Mr. Greenwood: The Colonial Office maintains close contact with the Trades Union Congress on trade union development in the Colonial Territories, and the T.U.C. plays an important part in the courses of training for trade unionists from overseas which are held in this country, under the auspices of the Ministry of Labour and the Ministry of Overseas Development.

Chinese People's Republic (Publications)

Mr. Freeson: asked the Secretary of State for the Colonies if he will take steps to lift the ban on the entry of publications from the People's Republic of China into British Colonial Territories.

The Under-Secretary of State for the Colonies (Mrs. Eirene White): There is


no such general ban. Particular publications from the People's Republic of China may be banned in individual Colonial Territories, but I could not say which publications in which territories without inquiring of all Colonial Governments.

Mr. Freeson: Will my hon. Friend undertake to make those inquiries, as she must know in her own mind that it is an unsatisfactory situation? Will not she agree that it is a basically unsound principle and anti-democratic to institute and maintain such bans and that the whole influence of the Government should be used to try to remove them?

Mrs. White: If my hon. Friend has any particular instance in mind, perhaps he will be good enough to let us know about it. In general terms, if we are asked for advice in this matter, we draw attention to Article 10 of the European Convention for the Protection of Human Rights which emphasises that freedom to receive and to impart information is desirable but also points out that certain safeguards may be necessary.

Mr. J. Amery: Will the hon. Lady ask her right hon. Friend the Secretary of State for Foreign Affairs to pass on to the Chinese Government the views so clearly expressed by the hon. Member for Willesden, East (Mr. Freeson)?

Mr. Freeson: Is my hon. Friend aware that the Chinese People's Republic is not responsible for the administration of British Colonial Territories and that the answer which she gave to my supplementary question remains unsatisfactory? If there is such a ban applying in certain territories, is it not the responsibility of the Government here to inquire into the facts and to take action to stop such anti-democratic practices?

Mrs. White: It is not necessarily my right hon. Friend's responsibility because a number of territories have control over their internal affairs to a greater or lesser degree. I do not consider that it is our overriding responsibility in all instances to take any action.

Colonial Office Staff

Mr. Bryant Godman Irvine: asked the Secretary of State for the Colonies what is the total number of staff employed by the Colonial Office at any convenient date five years ago and today.

Mrs. White: On 1st April, 1960, there were 1,748 staff employed by this office. Today there are 591.

Mr. Godman Irvine: Is the hon. Lady satisfied that this is about right in relation to the responsibilities that the Department is now exercising?

Mrs. White: The Department has the staff it requires. It will, of course, be understood by the House that when the Department for Technical Co-operation was established in 1961 a number of members of the Colonial Office staff were transferred to that Department.

Mr. Sandys: Do not the steep decline in the numbers employed in the Colonial Office and the undoubted anxiety which exists among the officials about their future emphasise the importance of fixing as soon as possible the date when the Colonial Office will be amalgamated with the Commonwealth Relations Office?

Mrs. White: As the right hon. Gentleman will know, my right hon. Friend the Prime Minister confirmed, in reply to a Question from the hon. Member for Surbiton (Mr. Fisher) on 23rd February, that the ultimate intention is to merge these two Departments. In the meantime, the Colonial Office staff are aware that they have opportunities to transfer to the Diplomatic Service, which covers all the overseas Departments, and we have no reason to think that it would be to the advantage of the Colonial Territories at this moment of time to merge the two Departments.

Sir G. Nicholson: As the hon. Lady's right hon. Friend is evidently of the opinion that there is not enough talent in the Colonial Office to give advice about the British Colonial Empire, are foreign nationals to take part in the work of the Colonial Office?

Mrs. White: I do not consider that that is required.

Mr. Tinn: Would my hon. Friend agree that her answer shows that at least under a Labour Government Parkinson's Law does not apply?

Oral Answers to Questions — INDIAN OCEAN

S.E.A.T.O. Bases

Mr. Wingfield Digby: asked the Secretary of State for the Colonies what has been the result of the negotiations


he has had about the building of new bases in the Indian Ocean for the use of British and South East Asia Treaty Organisation forces.

Mr. Greenwood: I have had no such negotiations. What has been under consideration in conjunction with the Americans is the possibility of establishing certain limited facilities in the Indian Ocean. The problems are still being studied and no decisions have yet been reached.

Mr. Digby: Is the right hon. Gentleman unaware that the Prime Minister told the House two days ago that an extensive review was being undertaken of our defence commitments in South-East Asia, including the problem of bases? Is the right hon. Gentleman in close touch with those who are involved in this review?

Mr. Greenwood: That is a matter for my right hon. Friend the Secretary of State for Defence. The question to which I have referred is the possibility of increasing communications facilities for joint use in the area.

Mr. H. Hynd: Should not bases in places like Gan, for example, be N.A.T.O. or United Nations bases to avoid this taint of colonialism?

Mr. Greenwood: Perhaps my hon. Friend will put any helpful suggestions he has to my right hon. Friend.

Sir T. Beamish: Is the right hon. Gentleman satisfied about the adequacy of the present bases in relation to the operation of the independent British nuclear deterrent east of Suez?

Mr. Greenwood: That is not a matter for my Department.

Oral Answers to Questions — MAURITIUS

Incidents

Mr. Chapman: asked the Secretary of State for the Colonies whether he will make a statement about the disorders which occurred in Mauritius on 1st May; and what reply he has sent to the request of the Social Democrat Party that a commission of inquiry be set up.

Mr. Greenwood: I am glad to say there have been no further incidents since

those referred to in my reply to my hon. Friend the Member for Kingston-upon-Hull, West (Mr. James Johnson) on 18th May. I am satisfied that no case has been made out for a commission of inquiry into these incidents, and I am asking the Governor to advise the Secretary-General of the party concerned accordingly.

Mr. Chapman: But since there is a considerable danger that allegations and counter-allegations between the parties on the origin of this trouble will be a very unhappy background to the constitutional discussions in September, will my right hon. Friend reconsider the idea of an inquiry, on the strict understanding that it should work and produce its findings well in advance of those September discussions?

Mr. Greenwood: It would be undesirable at the present stage of constitutional development in Mauritius for there to be a period of recrimination between the parties as to the responsibility for incidents of this kind, and I must, therefore, decline the suggestion that an inquiry should be held.

Mr. J. Amery: Is the right hon. Gentleman aware that, while we naturally regret the disturbances which are troubling the island at the moment, we welcome the prompt and, as it proved, effective action which the Government took to restore calm in the Island?

Mr. James Johnston: May I draw my right hon. Friend's attention to the fact that there is no such party as the Social Democrat Party in Mauritius, that Mr. Duval, the self-styled leader, only masquerades as leader and is, in fact, the vice-leader or deputy-chairman of the Parti Mauricien, which corresponds to a badly behaved Conservative Party in the United Kingdom?

Constitution

Mr. Fisher: asked the Secretary of State for the Colonies whether he will make a further statement about the present situation in and the future constitutional position of the island of Mauritius.

Mr. Greenwood: I described the present position in the island in my reply to an earlier Question by my hon. Friend


the Member for Birmingham, Northfield (Mr. Chapman).
As regards the future constitutional position, I am not yet able to add to what I said in my reply to the hon. Member for Haltemprice (Mr. Wall) and my hon. Friend the Member for Kingston-upon-Hull, West (Mr. James Johnson) on 15th April.

Mr. Fisher: Will the right hon. Gentleman bear in mind that the racial composition of the population in the island and the tensions to which it is liable to give rise make this potentially a dangerous problem, and will he agree that it is essential for racial peace to do everything in our power to retain the coalition Government and to get agreement among the main political parties about the constitutional future?

Mr. Greenwood: Yes, Sir; I regard two things as very desirable. One is that the period of uncertainty about the future of the island should be ended as quickly as possible. When I was in Mauritius earlier, I said that I hoped that it would be possible to hold a conference in September. Second, I agree entirely with the hon. Gentleman in considering that it is in the interests of the whole Mauritian people that a Government who are widely representative of all sections of the community should remain in office between now and the holding of the conference.

Oral Answers to Questions — GIBRALTAR

Situation

Mr. Gregor Mackenzie: asked the Secretary of State for the Colonies if he will make a statement on the current situation concerning Gibraltar.

Mr. William Hamilton: asked the Secretary of State for the Colonies what progress has been made in recent weeks in the settling of the Gibraltar question.

Mr. J. Amery: asked the Secretary of State for the Colonies whether he will make a further statement on the situation in Gibraltar.

Mrs. White: There has been no change of any significance in the situation at the frontier from that set out in the White Paper presented to Parliament last month,

and I am sorry to say that, so far, no progress has been made in achieving a settlement of the question. No new restrictions have been imposed since early in March.

Mr. Mackenzie: When can we expect to have a report on economic development on the Rock, which seems to most people to be most important for the well-being of the Gibraltarians?

Mrs. White: As I have already told the House, consideration of the report of the economic adviser to my right hon. Friend is being undertaken by the Gibraltar Government. We are not yet in a position to inform that Government of their allocation under the new Overseas Development Bill, as it has taken rather a long time in Committee. When we are able to do so, we shall let them know how much assistance under that Measure will be available.

Mr. Hamilton: Will my hon. Friend assure the House that the interests of the Gibraltarians are being adequately safeguarded by Her Majesty's Government, and can she say when the Government will take retaliatory action instead of just sitting idly by allowing the Spanish to impose and continue to impose these irritating restrictions?

Mrs. White: We have made perfectly clear that it is our intention to safeguard the interests of the inhabitants of Gibraltar. If my hon. Friend will consider carefully the possibilities of retaliatory action, he will realise that most of them also have disadvantages. We have not ruled out the possibility of retaliatory action, but I do not think that, in the present circumstances, it is desirable.

Mr. J. Amery: First, will the hon. Lady consider publishing the Selwyn report, as I think it was called, on the ways by which Gibraltar might be made less dependent on Spain economically? Second, what representations have been made to the Spanish Government since we last discussed this matter in the House on the Adjournment for the Easter Recess?

Mrs. White: The report is one to the Government of Gibraltar and it is for them to decide. It was not, I think, intended for publication, and in any case


it is not our direct responsibility. As regards further communications with the Spanish Government, two Notes have been addressed to them, on passports and on passes for workers, through my right hon. Friend the Secretary of State for Foreign Affairs. I understand that replies to both are still awaited.

Sir H. Studholme: When the Secretary of State entertained the members of the United Nations Special Committee on Colonialism here last week, was the question of Gibraltar discussed? Is the hon. Lady aware that there is great resentment in the country that these people, most of whom are bitter enemies of Britain and advocate the immediate handing over of Gibraltar to Spain, should have been entertained by the right hon. Gentleman and Lord Brockway at the taxpayers' expense?

Mrs. White: The remark to which the hon. Gentleman refers was not made to us on that occasion. It was made, we understand, purely personally, to some Press representatives afterwards. [Interruption.] Had it been made to me, I should have known what reply to give. [HON. MEMBERS: "What about a reply now?"] If hon. Members want to ask questions, I should be obliged if they would rise in their places because I am finding it very difficult to hear these informal supplementaries. We understand that the remark in question was made purely privately by a gentleman from Venezuela.

Oral Answers to Questions — ANTIGUA

Economic Situation

Mr. George Jeger: asked the Secretary of State for the Colonies whether he will make a statement on the present economic position of Antigua and the request for assistance he has received.

Mr. Greenwood: The general economic position of Antigua has improved in recent years largely owing to the growth of the tourist industry. As a result, the territory has been out of grant in aid since 1963. Its economy is, however, still largely dependent upon the sugar industry, which this year is in difficulties because of the drought. The British Government have agreed to provide $1·5 million from C.D. & W. funds for water

conservation works and are consulting the Antigua Government about other measures to strengthen the economy.

Mr. Jeger: Are there any plans for alternative industry there in view of the uncertainty of the main industry, the sugar crop?

Mr. Greenwood: We are well aware of the importance of diversifying the economy of Antigua, which is a matter constantly engaging the attention both of the Antigua Government and of Her Majesty's Government.

Mr. Sandys: Can the right hon. Gentleman say whether the additional assistance which is being given to Antigua will help to make the island more prepared to co-operate in the formation of a federation?

Mr. Greenwood: I could not answer that, I am afraid, but it will help the Antigua Government to put the economy of the country on a more viable basis.

Oral Answers to Questions — SPAIN

British Subjects (Campo Area)

Mr. Jackson: asked the Secretary of State for the Colonies what progress has been made in rehousing those British subjects who earlier this year were forced to leave the Campo area in Spain.

Mrs. White: With two exceptions all families with children have now been moved into cubicle accommodation. Only single men and married people without children remain in dormitories.

Mr. Jackson: Has my hon. Friend taken note of the two letters I forwarded to her from Gibraltarians? Can she assure us that those persons resident in the Campo area who have been dispossessed will not be required to live indefinitely in squalor as a result of their loyalty to Britain?

Mrs. White: I have received the letters. I am much concerned about the conditions of the families to which my hon. Friend refers. However, one must, on the other hand, remind oneself that there are people in Gibraltar who also need housing accommodation and that one must bear their interests in mind as well as those who have had to come across the frontier.

Mr. Amery: May I take this opportunity to assure the hon. Lady that when my hon. Friend the Member for Surbiton (Mr. Fisher) and I went to Gibraltar together we were deeply impressed by the work that the Gibraltar Government were doing on housing problems, especially for the refugees?

Mrs. White: I am sure that the right hon. Gentleman's remarks will be much appreciated.

Oral Answers to Questions — ADEN

Constitution

Mr. Jackson: asked the Secretary of State for the Colonies if he will make a statement on the further constitutional progress he expects in Aden in the near future.

Mr. Greenwood: As I announced on 11th May in reply to a Question by my hon. Friend the Member for Cleveland (Mr. Tinn), I have decided to appoint a Constitutional Commission for South Arabia. I hope that the recommendations of this Commission, when received, will suggest what is the most appropriate and most generally acceptable course of future constitutional development for the area, so that we can make progress towards the establishing of an independent Arab State in South Arabia not later than 1968.

Mr. Jackson: Could my right hon. Friend give an assurance that in the meantime we might have some interim constitutional advance, particularly in Aden?

Mr. Greenwood: I would not rule out interim advances in various parts of the territory, but the important thing really is to concentrate as far as possible upon the more wide-ranging and more long-term constitutional changes that are required.

Mr. J. Amery: Is the right hon. Gentleman aware that the more we have looked at his proposal the less we like it? Is he aware that we regard this as an abdication of the Government's responsibility to reach a settlement by direct negotiation with the Federal Government after, of course, taking into account the views of the Government of Aden and of other interested parties?

Mr. Greenwood: I hoped that I had answered that on Monday, when the same question was put by the right hon. Member for Streatham (Mr. Sandys). It is a problem with very special complications and far from this being an abdication of responsibility it is an attempt on our part to assert our responsibility after taking into consideration the advice of those best qualified to advise us on an issue of this kind.

Sir F. Bennett: Can the right hon. Gentleman confirm whether or not the future of the base is to be excluded from consideration by the Commission? What response has he had from the United Nations to his suggestion that it should be associated with the Commission?

Mr. Greenwood: I dealt with both those questions in my reply on Monday.

Mr. Sandys: Is it not becoming clear to the right hon. Gentleman that no one really wants this Commission of his? Would he not be well advised to pursue agreement by direct discussion with the parties concerned?

Mr. Greenwood: No, it is far from clear to me that there is such a state of affairs. I believe that the Commission will be welcomed by important sections of opinion in South Arabia, and I intend to pursue this policy patiently and with understanding of all the difficulties facing the people of South Arabia as well as Her Majesty's Government.

Mr. Sandys: Who have welcomed this suggestion so far? [HON. MEMBERS: "We have."]

Mr. Greenwood: The Federal Ministers.

Oral Answers to Questions — SOUTH ARABIA

Constitutional Commission

Mr. Biggs-Davison: asked the Secretary of State for the Colonies whether he will now state the membership of the South Arabia Commission.

Mr. J. Amery: asked the Secretary of State for the Colonies whether he will make a further statement on the composition of the Aden Constitutional Commission.

Mr. Greenwood: I have nothing at present to add to the statement I made to the House on 24th May.

Mr. Biggs-Davison: If the right hon. Gentleman intends to persist in sheltering behind a Commission, will he at least give us an assurance that he will not look outside the Commonwealth for members of it? Is this not a deplorable and weak and unprecedented proposal? Can it not have very dangerous results in other parts of the Commonwealth?

Mr. Greenwood: No, Sir. I do not share the hon. Gentleman's xenophobia. I think that the proposal we have made will have the beneficial effect of showing our readiness to seek the co-operation of the United Nations in matters of this kind.

Mr. Amery: Will the right hon. Gentleman reconsider the question of inviting persons from outside the Commonwealth to serve? It is really impossible to separate the eventual political settlement of South Arabia from the future of the base at Aden, and it is quite wrong, where something of such importance to the Commonwealth is concerned, to invite persons from outside to recommend what the settlement should be.

Mr. Greenwood: No, Sir. I made it clear that members of the Commission will be appointed by me. They will report to me and it will be for Her Majesty's Government to take the necessary decisions in the light of the advice we receive.

Mr. A. Henderson: Would my right hon. Friend make it clear that the purpose of the Commission is to make constitutional recommendations and that this is not inconsistent with future negotiations with those who speak for the people in the Federation's territories?

Mr. Greenwood: I am much obliged to my right hon. and learned Friend.

Mr. Amery: Is the right hon. Gentleman aware that he has in his Department all the necessary information about the situation in Aden and that if there is any he has not got he can get it easily by discussion with the Aden Government and the Federal Government? What is the need to import people who do not understand the problem and have no experience of it into this affair?

Mr. Greenwood: All that information and advice was available to me at the beginning of March when, unfortunately, it was not possible to get the people of South Arabia and their representatives to sit together at the conference table. I believe that the work of the Commission will make it possible to build bridges between the differing elements in the territory, and I believe this to be one of the most valuable rôles that the Commission will fulfil.

Oral Answers to Questions — FIJI

Nadi-Suva Road

Mr. Bryant Godman Irvine: asked the Secretary of State for the Colonies what progress is being made with plans for improvement of the Nadi-Suva road in Fiji.

Mrs. White: Progress on the improvement of the Nadi-Suva road is dependent on the Colony being able to raise the necessary loan finance on reasonable terms. This loan finance must be additional to that at present required for other important development projects and the Fiji Government are currently giving urgent consideration to the raising of such a loan.

Mr. Godman Irvine: In view of the importance of the road to the economic life of the territory, will the hon. Lady have another look at the matter and see whether there is any help or assistance she can give?

Mrs. White: We shall do all we can, but we have to consider priorities in this.

Oral Answers to Questions — ECONOMIC AFFAIRS

Retail Prices

Mr. Ioan L. Evans: asked the First Secretary of State and Secretary of State for Economic Affairs what communications he has received from trading organisations stating that they were reducing retail prices because of the reduction in the import surcharge on 27th April.

The Minister of State, Economic Affairs (Mr. Austen Albu): rose—

Hon. Members: Where is the First Secretary?

Mr. Speaker: Order. The inquiry may be most indiscreet.

Mr. Albu: We have no precise information about individual price changes from trading organisations or from other sources. But it follows clearly from the recent White Paper on Prices and Incomes Policy Cmnd. 2639 that where non-labour costs are reduced and there is no off-setting an unavoidable increase in labour or capital costs per unit of output, prices ought to be reduced.

Sir T. Beamish: On a point of order. I apologise for interrupting, but as the Minister of State did not say "I have been asked to reply" and as this is the third occasion on which the First Secretary has absented himself on an occasion when his Questions are to be reached and when he must have known it, is not the House owed some explanation of this apparent discourtesy?

Mr. Speaker: Intriguing as it may be, it does not give rise to any matter for the Chair, for it is in no position to dictate a course of action.

Sir F. Bennett: Further to that point of order. With great respect, I think that it does concern the Chair, because you yourself, Mr. Speaker, said that the question on the subject might be indiscreet. Could you elaborate whether you meant that it would be indiscreet to question or answer?

Mrs. Renée Short: You little twerps.

Hon. Members: Withdraw.

Mr. Speaker: Order. I have nothing to add to what I said seriously just now. The answer to the question of the hon. Member for Torquay (Sir F. Bennett) to myself, although described as a point of order, is that it is not my intention to pursue that a step further.

Sir A. V. Harvey: On a point of order. This is a different subject. I distinctly heard the hon. Lady the Member for Wolverhampton, North-East (Mrs. Renée Short) say "You little twerps", thus addressing it to the Chair—[Interruption.]

Mr. Speaker: We have considered in the course of this Session the precise meaning of that term in another context. In the circumstances, I have to say that

it appeared to be directed to a multiple object. Let us get on.

Mr. Evans: If we can get back to Question No.20; I thank my hon. Friend for his Answer. Would he consider submitting this matter to the Prices and Incomes Board, because when this import surcharge was first introduced it led to certain trading organisations saying that this was a reason why they would increase prices?

Mr. Albu: First, I should like to thank hon. Members opposite for the free publicity which they always give me when I appear at the Box. In reply to my hon. Friend's question; of course, if there were any general signs that the import surcharge were being used for raising prices above their appropriate level, we would consider his suggestion.

Sir Knox Cunningham: Would the hon. Gentleman consider removing this surcharge completely from the raw materials being brought into Northern Ireland for man-made fibres, as this industry is being adversely affected by the surcharge?

Mr. Albu: I do not think that arises out of the Question.

Wage Agreements

Mr. Bruce-Gardyne: asked the First Secretary of State and Secretary of State for Economic Affairs whether he intends to refer the recent wage agreement relating to the plumbing industry in Scotland to the Prices and Incomes Board.

Mr. Albu: My right hon. Friend—

Sir G. Nicholson: On a point of order. Although not a matter of order, is it not customary for a Minister in these circumstances to say, "I have been asked to reply"?

Mr. Speaker: I think the hon. Gentleman is mistaken; not when the Minister concerned is a junior Minister of the Department as opposed to a Minister from another Department.

Mr. Albu: I take it that hon. Members opposite want answers to their Questions. My right hon. Friend is considering, in the light of further information which the Scottish plumbing


employers have now supplied at his request, whether any investigation by the Board is desirable.

Mr. Bruce-Gardyne: Can the hon. Gentleman get his right hon. Friend to hurry up about this? This award involves a 20 per cent. increase over 12 months. Is it necessary for the right hon. Gentleman, who cannot come here to answer Questions, to spend all this time working out whether this award is inflationary and should be referred to the Board?

Mr. Albu: My right hon. Friend recently met the Scottish plumbing employers and asked for further information about the earnings and hours of work of Scottish plumbers and the implications of the recent agreement on prices. The federation undertook a special inquiry into the earnings of its members and the results were sent to my right hon. Friend the First Secretary only last week.

Mr. Godber: Would the hon. Gentleman bear in mind that there could be very widespread repercussions in this matter, as on a previous occasion, and will he urge his right hon Friend to come to a speedy agreement?

Mr. Albu: We are certainly very concerned with the implications of this agreement on prices, but I must not say any more at present.

Mr. Emrys Hughes: Is my hon. Friend aware that many Scottish plumbers are considering forming themselves into limited liability companies in order to avoid the Capital Gains Tax?

Mr. Bruce-Gardyne: asked the First Secretary of State and Secretary of State for Economic Affairs what percentage of wage agreements, measured by the number of workers involved, reached since 1st January, 1965, and what percentage of wage claims currently awaiting settlement, respectively, fall within the limits of the 3 to 3½ per cent. norm for wages and incomes.

Mr. Albu: The majority of the wage settlements since 1st January, 1965, have been in excess of the 3–3½ per cent. norm. It is not possible to give precise figures because some of the agreements are complex and are, for example, designed to give the greater benefit to lower paid workers. Nor can a useful figure be arrived at in respect of outstanding

claims, since many do not specify precise amounts but are expressed in general terms.

Mr. Bruce-Gardyne: Is it not rather unsatisfactory that the Department of Economic Affairs should appear to be the only body which is unaware of what is happening to its incomes policy? In view of what is happening to its incomes policy, would the hon. Gentleman suggest to his right hon. Friend that he might try what an injection of a little competition into the economy would do?

Mr. Albu: We are fully agreed about the necessity to inject a little competition and, as the hon. Gentleman will know, we are strengthening the Monopolies Commission. We are fully aware of what has been taking place with prices and incomes, and we are very concerned about it, but we have only just started such a policy and we have never said that it would be easy to achieve. So far as I know, no previous Government succeeded in carrying out such a policy.

Mr. Peter Walker: Could the hon. Gentleman give details of any claims which have come within the 3 to 3½ per cent. range?

Mr. Albu: There are some, but I do not have the details with me at the moment.

Mr. Snow: Would my right hon. Friend consider republishing the White Paper on Prices and Incomes Policy in the simplest language possible so that Members of the Opposition can understand the provisions of paragraph 15 dealing with the need to raise the levels of certain industries which are far too low as it is?

Dame Irene Ward: On a point of order. Is it in order for the hon. Member for Litchfield and Tamworth (Mr. Snow) to address a question to a ghost? He addressed it to the right hon. Gentleman, who is not here.

Mr. Speaker: In this instance, the ghost can be personified by a junior Minister.

Mr. Albu: In reply to my hon. Friend, may I say that there is an extremely good pamphlet produced by the T.U.C. Perhaps hon. Members opposite would like to read it.

Mr. Ridsdale: Why is the First Secretary having difficulty in working out a wages policy? Does he work overtime at Question Time in order to work out an incomes policy?

Mr. Albu: I am absolutely amazed and horrified at the utter frivolity of hon. Members opposite.

Hon. Members: Oh.

Mr. Speaker: Order. The noise delays progress with Questions. For that reason it is inappropriate.

Trade Associations (Prices)

Mr. Hamling: asked the First Secretary of State and Secretary of State for Economic Affairs what help has been offered to his Department by trade associations in his campaign to hold down prices.

Mr. Albu: Any help required has been readily given both by individual trade associations and by the national organisations.

Mr. Hamling: Would my hon. Friend note the difference between the attitude of industrialists and the stupid attitude of some hon. Members opposite?

Mr. Albu: This is very clear indeed. I doubt whether hon. Members opposite are doing themselves any good with the trade associations, which are giving us great assistance in this matter.

Mr. Peter Walker: Would the hon. Gentleman agree that he has received far more help from the trade associations than he has from the Postmaster-General or the Chancellor of the Exchequer?

Mr. Albu: That only displays the hon. Gentleman's complete ignorance of the policy and of how it is being carried out.

Press Information

Mr. Godber: asked the First Secretary of State and Secretary of State for Economic Affairs if he will make a further statement about information to the Press on the subject of the first references to be made to the Prices Board.

Mr. Albu: As my right hon. Friend informed the House in the debate on 11th May, reports in the Press about the likely

subjects of the first references to the National Board for Prices and Incomes appear to have been based on intelligent speculation rather than on any leakage of information. Although the subject was raised with him during the previous week by some of the industrial correspondents with whom he was discussing recent developments in the prices and incomes policy, neither he nor the Department gave them any new information on this subject.

Mr. Godber: Perhaps I could preface my supplementary question by acknowledging that the First Secretary suggested that I raised the matter again so that he could clarify what he said on a previous occasion. He apologised to me for the fact that he could not be here today; it is only fair to say that. May I ask the Minister who is replying precisely what he meant by his last response, because the First Secretary was very categorical in what he said in the debate. He said.
Not only can I answer for my own Department, but I can answer for others: there was no leak … There was no informed talk to correspondents …—[OFFICIAL REPORT, 11th May, 1965; Vol. 712, c. 310.]
This does not seem to tie in with what the hon. Gentleman has just said. In fact, it seems from what he has told us that guidance was given. Therefore, should not the First Secretary apologise to those people in the industries concerned who are embarrassed by this leak?

Mr. Albu: No. My right hon. Friend stands by what he originally said in the debate. He did not give the correspondents any new information about our intentions. There was an informed briefing, and there was a good deal of speculation, but the interesting thing about that speculation is that newspapers published forecasts of our intentions which were not exactly accurate. In fact, many of them published completely different forecasts, which only shows that they were picking and choosing among a large number of possible candidates.

Mr. Godber: Surely it is clear when one studies those reports that they did come very near to the truth and, in fact, that two of them were precisely accurate. It is clear that some fairly plain indication was given. Surely the purpose of the


right hon. Gentleman's suggestion that I should table a Question about the matter again was that it should be revealed to the House. It would be better if the right hon. Gentleman came clean and apologised fully.

Mr. Albu: It is clear that my right hon. Friend did not give any direct information of the sort which the right hon. Gentleman has in mind. No doubt he was asked a number of questions. As the right hon. Gentleman knows, it is very difficult when one is asked questions and there is a lot of speculation, for correspondents not to pick up these things and make what they can out of them.

Secretary of State for Economic Affairs (Letters)

Mr. Shinwell: asked the First Secretary of State and Secretary of State for Economic Affairs what response he has now received from those firms to whom he addressed letters asking them to refrain from increasing prices.

Mr. Albu: No letters have gone out recently. But the considerations of the national interest set out in the White Paper (Cmnd. 2639) published last month are addressed to all concerned with determining prices.

Mr. Stratton Mills: Would the hon. Gentleman consider asking the First Secretary to send out another letter to those in industry asking them whether they consider the Finance Bill to be very helpful to industry?

Mr. Albu: I do not know why hon. Members opposite want my right hon. Friend to be here if they propose to ask supplementary questions like that.

Oral Answers to Questions — BOARD OF TRADE

Resale Price Maintenance

Mr. Edmund Dell: asked the President of the Board of Trade what is the average annual value of sales of goods covered by the Resale Prices Act; how many applications for exemptions have been registered under the Act; what is the annual retail value of goods covered by these applications; how many of these applications have now been voluntarily withdrawn; and what is the annual retail value of applications so abandoned.

The Minister of State, Board of Trade (Mr. George Darling): Precise information about the value of goods sold subject to resale price maintenance is not available. Some time before the enactment of the Resale Prices Act it was estimated that about 40 per cent. of consumers' expenditure on goods was on price maintained goods, which would imply an annual value of, broadly, £5,000 million. Under the Resale Prices Act, resale price maintenance is now unlawful, except in respect of goods which have been registered.
I understand from the Registrar that 654 applications have been accepted for registration, but no estimate is available of the retail value of the goods to which the applications relate, nor of the extent to which suppliers of registered goods are continuing to practise resale price maintenance. The Act contains no provision for the withdrawal of applications, once they have been entered on the register.

ANGLO-AMERICAN RELATIONS

Mr. Marten: asked the Prime Minister if, following his talks with President Johnson, he will make a statement on the present state of Anglo-American relations.

The Prime Minister (Mr. Harold Wilson): I would refer the hon. Member to the Answer I gave on 25th May to a Question by my hon. Friend the Member for Wolverhampton, North-East (Mrs. Renée Short).

Mr. Marten: Mr. Speaker, I apologise for pursuing this matter because the Question was in part answered last Tuesday. Does the Prime Minister realise that I have put down a number of Questions to him and that a group of his hon. Friends put down the same Question a few days before for oral answer? This is why the Questions are still on the Order Paper. Would the right hon. Gentleman please direct his criticisms to his hon. Friends and not to me? On the Question, may I ask the Prime Minister whether the Government are preparing a draft non-dissemination treaty for nuclear weapons? If so, is he doing it in co-operation with the Americans?

The Prime Minister: I did not criticise the hon. Gentleman, but, in response to his invitation, I would say that the fact that these Questions were put down by the hon. Gentleman so long in advance is one of the reasons, I think, for the Report which we have had from the Select Committee on Procedure on this particular matter. The answer to the latter part of his Question is "Yes, Sir".

EAST OF SUEZ COMMITMENTS

Mr. Bence: asked the Prime Minister what further consideration he has given to the problem of Great Britain's rôle east of Suez; and if he will make a statement.

The Prime Minister: I would refer my hon. Friend to the Answer I gave on 25th May to a Question by the hon. Member for Harwich (Mr. Ridsdale).

Mr. Bence: For the last seven years our balance of trade has been running against us. Last October we had a £800 million deficit. We are now carrying a heavy burden throughout the world when our major competitors are carrying nothing like this burden. Will my right hon. Friend see what he can do to reduce our heavy international commitments all over the world?

The Prime Minister: I can tell my hon. Friend that in the first quarter of the year the balance of trade, taking into account invisible trade, was favourable. With regard to his question about the heavy cost of military expenditure overseas, I have made it clear on a number of occasions that this must be brought down. We are looking into part of it in connection with the wider defence review, but I think that the whole House will agree that a start must be made in relation to our very heavy costs in Germany.

Mr. Maudling: Is the Prime Minister satisfied that the British forces will have the weapons which they need to carry out this rôle? If he is satisfied in the light of recent cancellations, will he tell the House the decision he has taken, because he must be satisfied about the replacement of the cancellations?

The Prime Minister: I am sorry to say that I am not satisfied. It has been

made clear by my right hon. Friend that a number of our troops in overseas theatres have been singularly ill-provided for in weapons, not least in the large number of helicopters which broke down in the last few months. But that situation is improving very well. I am glad to be able to tell the right hon. Gentleman that it is going better now.

Mr. P. Noel-Baker: May I ask the Prime Minister whether the Government will reconsider using the United Nations to try to end the Indonesian aggression against Malaysia? Does he recognise that, apart from the great economic burden which we are carrying with 50,000 troops there, the prolonging of this war month after month must have a most demoralising effect on the binding force of the Charter in Asia and elsewhere?

The Prime Minister: The 50,000 troops who are there are not there, in the main, in relation to the confrontation of Indonesia. As I have said many times, we should certainly welcome any steps which can be taken, whether by the United Nations or by the direct mediation of an Asian Power, to end this quite senseless confrontation. One of the difficulties, as my right hon. Friend knows, is that the Indonesians are so obsessive about the question of Malaysia that they withdrew from the United Nations because Malaysia was there.

Mr. Hugh Fraser: Is not the Prime Minister aware that to draw a distinction between policy east of Suez and the rôle east of Suez is becoming very thin? The whole House is most worried by the situation in South-East Asia, and again and again the right hon. Gentleman has avoided making any statement on it. Surely, the time to make a statement has come when this very day the American Fleet is bombarding the coast and when this very day the New Zealanders have said that they will support America. Will not the Prime Minister make a statement, and soon, on this whole question?

The Prime Minister: The Question on the Order Paper refers to Great Britain's rôle east of Suez. It does not say anything about the American Fleet or about New Zealand. [Interruption.] I certainly have not been backward in answering questions on Vietnam. If the right hon.


Gentleman has any Questions to put on Vietnam, let him put them on the Order Paper and they will be answered.

Mr. Fraser: I am putting them now.

Sir Alec Douglas-Home: There is a great deal of concern and interest in this matter in the House. May I ask the Prime Minister—I realise that I could make this request following the announcement of business, but I prefer to put it now—whether we can have a foreign affairs debate fairly soon after Whitsun on this whole situation?

The Prime Minister: The right hon. Gentleman has been a Member of the House long enough to know that that is a question that is normally put to the Leader of the House, although we will consider it.

PAYMASTER-GENERAL (QUESTIONS)

Mr. G. Campbell: asked the Prime Minister what considerations led him to arrange for the Paymaster-General to answer Questions on a subject for which he has no administrative responsibility, namely, the co-ordination of home information services.

The Prime Minister: To help the House by having a Minister to whom hon. Members could table Questions on this subject, Sir.

Mr. Campbell: Is not this arrangement unfair to the Minister concerned, the Paymaster-General? Because he is not responsible for the subject, he seems to have been in some difficulty in answering supplementary questions. Is it not also unfair to the information services and a most unsatisfactory arrangement for the House?

The Prime Minister: No, Sir. I made it plain last year—indeed, before the election—that a Labour Government would not employ a Minister paid with taxpayers' money to do the kind of job that was done at Tory Central Office by a whole-time Minister. Indeed, there were two such Tory Ministers, one on information and the other a full-time chairman of the organisation. I am against the appointment of a Minister paid with public money to do a party function. For that reason, no Minister is doing this

job. When, however, hon. Members put Questions down they are entitled to an answer, so it was thought suitable, for the reason I have stated, that a non-Departmental Minister, even though he has no responsibility in that field, should answer Questions.

Mr. Tinn: Would my right hon. Friend agree that the present arrangement gives hon. Members opposite who wish to harry the Paymaster-General the opportunity to indulge in a blood sport for which they have more appetite than ability?

The Prime Minister: That may well be. But in so far as hon. Members consider, as I do, that the co-ordination of home information services is important, it would be a nice change if they started putting down Questions on the subject of the home information services, and then they will get a full answer.

Mr. Hogg: Without in any way seeking to pursue a purely partisan point, would not the Prime Minister recognise that it is precisely because the co-ordination of home information services is important that it cannot, and should not, be treated by either side of the House as a purely party function? Is it not desirable, therefore, to have a Minister whose function is to do just that, as it was done by my right hon. Friend?

The Prime Minister: I know that the "shadow" Paymaster-General is always very careful about entering into controversial matters, but it is precisely because in the last Government we had this abuse, this public scandal, of a Minister carrying out Tory Party propaganda with the taxpayers' money.

MIDDLE EAST (TRIPARTITE DECLARATION)

Viscount Lambton: asked the Prime Minister if, in view of the differences in the situation in the Middle East since 1950, he will seek to redefine the Tripartite Declaration of 1950.

The Prime Minister: I have nothing to add to the Answer I gave on 13th April to a Question by the hon. Gentleman.

Viscount Lambton: Will the Prime Minister be more explicit because of the


risk of making a statement which could be interpreted, like so much which the right hon. Gentleman says, in so many ways?

The Prime Minister: I am not quite sure what the hon. Member really wants me to add to my statement of 13th April, because that Answer was a simple endorsement of a statement by Mr. Macmillan on 14th May, 1963. I agree with the hon. Member about the importance of this subject, but he has hardly been very specific in his question. If he is not satisfied with the statement of Mr. Macmillan on 14th May, 1963—and he was not very satisfied at that time with his right hon. Friend—perhaps he will tell me exactly what he wants, and I will then deal with this important question.

Viscount Lambton: The Prime Minister will surely agree that on the last occasion when this matter was raised his right hon. Friend the Member for Easington (Mr. Shinwell) said that circumstances had changed considerably since 1953. As a result of that, will the Prime Minister please say how they definition stands today?

The Prime Minister: I am sorry that the hon. Gentleman did not hear. What I said in my previous Answer was not 1953, but 1963. If the hon. Gentleman would like to explain the particular anxieties which have arisen since 1963 in the form of a Question, I will answer it. In so far as the anxiety related to the Jordan waters, which was not very much involved in the Tripartite Declaration, I answered that in a supplementary answer on the hon. Member's Question on 13th April.

Mr. Maudling: As there have been very great changes in the Middle East in recent years and as new and important dangers are looming there, is there not a case for a new initiative to be taken, preferably in consultation with the United States and our French allies in this matter?

The Prime Minister: That may well be so. We had discussion on this—the right hon. Gentleman will remember his own speech and mine—in the debate on foreign affairs at the beginning of last month. I think that both he and I and

the Leader of the Opposition expressed anxieties about new and current dangers arising from the Jordan water question. Since the Tripartite Declaration of 1950, which the previous Government quietly allowed to drop and which died, I think, at about the time of Suez, was really related to a question of arms shipments, I am not sure that this question is relevant today in relation to arms shipments.

CENTRAL STATISTICAL OFFICE

Mr. William Hamilton: asked the Prime Minister what progress has been made in the modernisation and extension of the work of the Central Statistical Office.

The Prime Minister: The comprehensive review of statistical information available to the Government, of which my right hon. Friend the First Secretary of State told my hon. Friend on 8th December last, will, I hope, be completed in the near future. It will then be possible to take whatever steps are necessary to extend the work of the Central Statistical Office and of the Government Statistical Services generally.

Mr. Hamilton: Is my right hon. Friend himself taking a personal interest in this? Is he aware that the statistical output of the Central Statistical Office is grossly inadequate? Can he say whether it was this which explained the behaviour of the Leader of the Opposition before the last General Election?

The Prime Minister: I think it is generally agreed that more information is needed, both on certain economic questions and, above all, on certain financial questions on which the Radcliffe Committee reported. I certainly would not accept any criticism of the Central Statistical Office, certainly not in respect of any deficiencies in the presentation of economic truths a year ago.

Mr. Stratton Mills: Has the Central Statistical Office any records to show how long it is since dealings were suspended in Government securities?

The Prime Minister: That is not a matter for the Central Statistical Office, but I have been looking at what it has


been doing. I find that despite all the crabbing of right hon. Members opposite, the balance of trade figure in the first four months this year as published by the Central Statistical Office—[Interruption.]—since this was not supplied to the right hon. Gentleman's speech writer yesterday, it might be useful to him and I give it to him now—has fallen to nearly one-third of the gap in the first four months of last year.

Mr. Maudling: Does the right hon. Gentleman think that this improvement has anything whatever to do with his policies?

The Prime Minister: In answer to the Shadow Foreign Secretary, I would point out that the shadow Chancellor, I think he is, sitting next to him, spent a little time at Question Time two weeks ago blaming the Government for the slightly adverse fall in the trade figures between one month and another. Perhaps the right hon. Gentleman can sort it out and brief his right hon. Friend.

Several Hon. Members: rose—

Mr. Speaker: Order. The debate must be business.

BUSINESS OF THE HOUSE

Sir Alec Douglas-Home: May I ask the Leader of the House whether he will state the business of the House for next week?

The Lord President of the Council (Mr. Herbert Bowden): Yes, Sir. The business for next week will be as follows:
MONDAY, 31ST MAY, WEDNESDAY, 2ND JUNE, and THURSDAY, 3RD JUNE—Further progress with the Committee stage of the Finance (No. 2) Bill.
TUESDAY, 1ST JUNE—Debate on Commonwealth and Colonial Affairs, which will arise on a Motion for the Adjournment of the House.
FRIDAY, 4TH JUNE—It will be proposed that the House should rise for the Whitsun Adjournment until Monday, 14th June.

Sir Alec Douglas-Home: May I return to the question which I raised with the Prime Minister at Question Time, when,

I think, the Leader of the House was not here? Will he bear in mind that there is a great deal of interest in the situation in the Far East, in the Malaysian and Vietnam situations, and that the House on the whole would like a debate on these matters soon after we return from the Whitsun Recess?

Mr. Bowden: During our exchanges last week I said that I thought we should have a debate on foreign affairs after the Whitsun Recess. The right hon. Gentleman will recall that we gave the last day in Government time. He might consider giving a Supply day after the Recess.

Mr. Woodburn: It is usual, in the business statement, to give some idea of the business on the Monday on which we return. Can my right hon. Friend give us any idea of the subject to be discussed on that day?

Hon. Members: Finance Bill.

Mr. Bowden: I am not answering my right hon. Friend's question at this point, but I think that it is a fair guess to say that it may be the Committee stage of the Finance Bill.

Mr. Bruce-Gardyne: Can the right hon. Gentleman now say when he expects to bring foward the Bill for the nationalisation of the steel industry?

Mr. Bowden: The answer is the same as last week, "Not next week, Sir".

Mr. Mendelson: Does my right hon. Friend recall that, in answer to questions on business, he gave an assurance last week, that he would consult his right hon. Friend the Foreign Secretary about a comprehensive statement on the situation in Vietnam? Has my right hon. Friend seen the statement yesterday by the American Secretary of State that he regards the situation there as very grave? In spite of that his Administration are to continue bombing operations in North Vietnam. In the light of this situation, is it not essential that the House should have a comprehensive statement from the Foreign Secretary before we adjourn for Whitsun?

Mr. Bowden: I have consulted my right hon. Friend about this. No doubt he will be making another statement. At this stage, I cannot say when.

Mr. Lubbock: In view of the Government's decision, announced this week, to adopt the metric system of weights and measures, will the right hon. Gentleman provide Government time for a debate on my Bill on decimal currency?

Mr. Bowden: No, Sir. I cannot promise that at the moment.

Mr. Hugh Jenkins: Has my right hon. Friend noted the Motion in my name on the illegal employment of children?
[That this House, noting that the employment of a child under the age of 12 years is a criminal offence, calls upon the Government to enforce the law in respect of the illegal employment of such children in commercial television advertising films.]
Is he aware that the law is being broken every day by the employment of children under 12 in commercial television advertising? Will he ask his right hon. and learned Friend to enforce the law until such time as a debate can be arranged on the subject and/or the law changed?

Mr. Bowden: My right hon. and learned Friend the Attorney-General has already answered a Question on this matter. I do not know whether he has anything fresh to say, but I shall communicate with him about it.

Mr. Hugh Fraser: May I ask the right hon. Gentleman to provide the opportunity for a debate on South-East Asia? It is no good shuffling this back to the Front Bench on my side of the House. Surely the duty of the Leader of the House is to find time, and to find it soon.

Mr. Bowden: I cannot add to what I have said, that we shall have a debate on foreign affairs after the Recess.

Mr. William Hamilton: As there will be three days next week on the Finance Bill, and there are likely to be some very late-night sittings at which votes will be taken, and bearing in mind that serious allegations have been made as to the breaking of the pairing arrangements last night and the difficulty of investigating them because the voting lists are not readily available to the Whips immediately after the voting, will my right hon. Friend undertake to make photostat copies of the voting as recorded in the Lobbies available to all the Whips' offices

immediately after the voting so that they can undertake immediate investigations into any similar allegations?

Mr. Bowden: I would much prefer to leave this matter to the usual channels, but I do not think that there would be any difficulty, as far as I am aware, in either side having access to the Division lists immediately after a Division.

Mr. Evelyn King: Has the right hon. Gentleman seen Motion No. 221 about constituents' rights?
[That this House, noting a letter, dated 20th January, 1965, from the Minister of Public Building and Works addressed to the hon. Member for South Dorset telling him it was "not fitting" that representations relating to wage rates should be made by an industrial employee to his Member of Parliament, reaffirms the traditional right of a citizen to write to his Member on any subject whatsoever, confirms the sanctity of correspondence between a Member of Parliament and his constituents and asserts the duty of Ministers to reply to Members in such matters.]
Would not the right hon. Gentleman consider the action of a Minister in suggesting that it was "not fitting" for a constituent to write to his Member of Parliament to be an invasion of an historic right? If that is the opinion of the Minister concerned, ought it not to be debated by the House?

Mr. Bowden: I could not promise a debate on that subject. There is no doubt about the right of any member of the public to write to his Member of Parliament on any subject, but, in a case of this sort, which concerns an industrial civil servant, it would perhaps be better if he consulted through what are the normal channels within the method of employment rather than through his Member of Parliament and the Minister; but I am not suggesting that that is wrong.

Lady Megan Lloyd-George: Can my right hon. Friend say when the Land Commission Bill is likely to come before the House?

Mr. Bowden: No, Sir. I cannot give a firm promise at present.

Mr. Box: Will the right hon. Gentleman give the House an assurance that


the First Secretary will be well enough to answer his Questions next week?

Hon. Members: Answer.

Mr. Lipton: So that more rapid progress may be made with the Finance Bill, may I ask whether my right hon. Friend has received any representations from the Opposition for a shortened Whitsun Recess?

Mr. Bowden: No, Sir.

Sir H. Butcher: Will the right hon. Gentleman consider helping the House by restoring the pre-war practice of having a pairing book in the "No" Lobby?

Mr. Bowden: This has been discussed on a number of occasions during the last 20 years that I have been here. I think that the present system works pretty well, but it is a matter for the usual channels rather than for the Whips.

Mr. Dean: Has the right hon. Gentleman seen Motion No. 220, relating to public service and Armed Forces pensions?
[That this House, recognising the hardship of public service pensioners and those retired from the armed forces, and especially of the older pensioners in these groups whose pensions bear no relation to similar pensions now obtaining in the public service and the armed forces, urges Her Majesty's Government to introduce special provisions to improve such pensions.]
As the cost of living has risen four points since October, can the right hon. Gentleman say when we will be able to debate this Motion?

Mr. Bowden: I have said before in the House that a review is taking place, after which a statement will be made. No doubt, a debate will follow the statement.

Mr. Bessell: Has the right hon. Gentleman seen Motion No. 224, relating to the sale by the B.B.C., of the microphone used by H.R.H. the Duke of Windsor on the occasion of his abdication speech, and further reports that this microphone was sold by a former official of the B.B.C. in a quite unauthorised manner?
[That this House notes with concern the action of the British Broadcasting Corporation in selling for the sum of only twenty-five pounds to an American film producer the historic microphone used by His Royal Highness the Duke of Windsor on the occasion of his abdication broadcast, and calls upon Her Majesty's Government to introduce the necessary legislation to prevent the sale by public undertakings of articles of historic importance which should be the property of the nation.]
In view of the seriousness of the matter, will the right hon. Gentleman consider providing time to debate it?

Mr. Bowden: I should think that the sale of the surplus property of the B.B.C., however valuable, is a matter for the day-to-day working of the B.B.C. itself. In this case, I do not think that the B.B.C. has any means of identifying which particular microphone was used. I hope that the purchaser bought the actual microphone, unlike many people who, in similar circumstances, buy a bed in which Queen Elizabeth I slept.

Mr. Ioan L. Evans: As so many Members opposite wish to participate in the debates on the Finance Bill, will my right hon. Friend consider making provision for the House to meet on Wednesday mornings? Would it not be better for hon. Members opposite to repeat themselves on Wednesday mornings rather than throughout the night?

Mr. Bowden: Progress with the further stages of the Finance Bill is very much in my mind at the moment, and nothing is being ruled out.

Orders of the Day — FINANCE (No. 2) BILL

Considered in Committee [Progress 26th May].

[Dr. HORACE KING in the Chair]

Clause 26.—(MISCELLANEOUS EXEMPTIONS FOR CERTAIN KINDS OF PROPERTY.)

3.41 p.m.

The Chairman: May I thank the Committee for the fact that there are no starred Amendments affecting business which is likely to be transacted during the Committee stage today, and take the opportunity of warning the Committee that from now onwards I shall lean heavily against starred Amendments which are likely to affect the business of the day.

Sir Martin Redmayne: I beg to move Amendment No. 367, in page 28, line 26, at the end to insert:
(5) A gain accruing on the disposal of an asset by way of gift or accruing on a disposal on death of an asset bequeathed by the deceased, shall not be a chargeable gain, if the asset is agricultural land within the meaning of the Agriculture Act 1947 or fixed equipment as defined by that Act.

The Chairman: It will be convenient if, with this Amendment, we take Amendment No. 265, in page 28, line 34, after "vocation" insert:
or compensation or payment received by a tenant farmer in respect of damage to his interest as a tenant whether arising out of a compulsory acquisition or otherwise".

Sir M. Redmayne: As you say, Dr. King, this Amendment is called for discussion with Amendment No. 265, which relates to compensation which may be received by a tenant farmer arising either from a compulsory purchase or from the dispossession of his tenancy in any other way.
I can save the time of the Committee if I do not go into any great detail on the matter, but ask two straight questions. Is compensation excluded from the assessment of a tenant's assets if he loses his tenancy? In any case, that question is closely related to Amendment No. 233, in page 28, line 35, at end insert:

(7) It is hereby declared that a gain shall not be a chargeable gain if it accrues in consequence of an acquisition by compulsory powers (or by sale by agreement to an authority possessing such powers).
which follows shortly, dealing with acquisitions by compulsory purchase. I hope that I need not go further into that point. Perhaps the Financial Secretary will be able to give an immediate answer to the question that I have just asked, if it is an easy answer, or thereafter, when we discuss Amendment No. 233.
I do not wish to take long over the Amendment, although it is of great importance to the farming industry and provides an opportunity to draw together some of the general arguments on agriculture and the land which have been very well put by my hon. Friends in previous debates. I make no apology for the fact that the Amendment asks for special consideration for agriculture in respect of capital gains.
It is certainly no fault of mine that I have to make this plea. It is no fault of Her Majesty's Opposition—and in that term I include the Liberal Party—who can claim to be those, alone in this House, who take a permanent, active and constructive interest in the future of agriculture. Nor is it the fault of the industry. It is rather the fault of circumstances in which the national interest, throughout the years, has created agriculture policies which have, in their turn, caused stresses and strains in the natural evolution of agriculture which compel sympathetic and special consideration when major changes in the tax system are proposed.
No other industry is subject to so many uncertainties. Nor is any other industry composed of so many small, but, nevertheless, efficient units. The British public should appreciate more actively that British farming, even though much of it consists of small units, is first-class in its efficiency. But the scale of the tax on capital gains, which can be sustained, however reluctantly, by other industries with some chance of survival, can deal a death blow to these small agricultural units, simply because of their smallness. In our consideration of a Capital Gains Tax farming must be regarded as holding an outpost position, which will be the first to be driven in if the tax is allowed to go forward in its present form and


without any special consideration being given to the problems of the industry.
During the last 20 years vast sums have been invested in agriculture, and in February, 1965, bank advances to the industry stood at £500 million. This scale of advances would never have been possible if it had not been backed by the solid rise in the value of freehold land and buildings which has taken plate during those years. The extent to which taxation of capital values on change of ownership or on any other disposal of land can undermine the security of agricultural credit and the free capital available to agriculture is not only most serious in itself but presages yet further difficulties for this or any other Government, in respect of their agricultural policies.
There seems to be little joy in milking capital from the farming industry for the pleasure of replacing it later by Government intervention, yet that will assuredly have to happen if agriculture is to survive the cumulative effects of a Capital Gains Tax over even a short period.
It may be said that the same argument can apply to other small enterprises in other industries which require a high degree of capital, but the profit-making capacity of other industries—because they avoid the tight control which has customarily been placed upon agriculture—makes the accumulation of capital and the repayment of loans in those industries at least very much easier, if never as easy as one would like. If it is the object of the Government to kill small enterprises and to create a situation in which ownership can more readily fall into the hands of the State, the Bill as it stands is admirably designed to achieve this object.
I ask the Committee to take into account just one proposition. Forget for the moment those who already own land—although the impact of the tax upon them will be just as onerous—and take only the example of the young man who acquired a farm after this Budget. In 20 years he will require, as anyone would, to take his son into partnership. By that time he will have prospered, and that is good. But, almost inevitably, by that time he will have seen the value of his farm appreciate by the false values accruing through inflation.

Mr. Emrys Hughes: Did not the previous Government make it extremely difficult for a young farmer to get any land?

Sir M. Redmayne: The hon. Gentleman knows perfectly well that even if that were true it is not relevant to my argument regarding a young man who, if the hon. Member wishes to put it in that way, had been fortunate enough to obtain a farm.
Such a young man will have seen the value of his farm increase by reason of inflation. At no time will he have been anything but short of capital. That is commonplace in the farming industry. But he will have made some progress, he will be less in debt than when he started, even if he is not firmly in credit. By 1985, he will desire to take his son into partnership and at that time the two will be required to produce, within three months in hard cash, about 30 per cent. of the capital accretion of those 20 years. Much of this may be false accretion arising from inflation.
The farmer need not hand over to his son. The boy could wait. The sad fact is that in such a case, and in thousands of similar cases, the death of the father—however long delayed, and however frustrating may be the situation for the son—may be the better tax bargain for the two of them; better than any arrangement which could be made during the lifetime of the father. What a way to run a country, to discourage the young man to start with, and what a splendid way to kill private enterprise.
Alternatively, the father and son may decide to take the plunge and pay the price. In a few years the farmer may die, and the son pays again. Nor need death strike only once in one generation. In such circumstances, if land values rise and inflation continues—under this Government it will certainly continue—and if farming prospers, the effect of Capital Gains Tax on farming after two or three disposals will seriously impair the chance of commercial survival for the inheritor of a farm. For these reasons the Amendment seeks to exempt farming land and the fixed equipment of farming from the tax. It may be said that the objective is too wide, although I do not think that it is.
Two other Amendments which were put on the Notice Paper and have not been called, asked for rather less. They asked that the liability for tax arising on any disposal should be deferred at the option of the younger or the older person. Perhaps that might be considered to be too wide, although, again I do not think that it is.
I ask that the Chancellor should earnestly consider how to devise a circumstance, even though it be limited to disposals between father and son or close relatives, in which there could be some leniency shown in respect of the punitive effect of the Capital Gains Tax. If the right hon. Gentleman will not accept that from the Treasury viewpoint, I will give him a compelling reason going beyond any commercial considerations. Farming families, rich and poor, have had a proud record of inheritance from generation to generation even in times—I suspect that this will strike at the heart of the Joint Parliamentary Secretary—when the survival of such an inheritance has not been easy.
The effect of the tax would be to cause that record to die and much of the spirit of rural England—I notice that the hon. Member for South Ayrshire (Mr. Emrys Hughes) has gone—and of Wales will die with it. I believe it well worth while for the Government, in the interest of the nation, to think seriously about this matter.
During our debates I have noticed that the Government and hon. Members opposite think only in what are quite apparently class-conscious terms. They speak only of the very small man, or the tycoon. These terms have been used constantly in the debate. It depends on what one calls a small man, but as the terms are used by the Government the small man or the tycoon are a minority in the community. I ask the Government to think about the real majority in the life of the nation, the vast, industrious middle-piece which is the real backbone of our national enterprise.

The Financial Secretary to the Treasury (Mr. Niall MacDermot): The right hon. Gentleman the Member for Rushcliffe (Sir M. Redmayne) has invited me to state the position of the Government in relation to this Amendment and the one which we

are discussing with it. Perhaps it would be helpful if I did so at the outset of our discussions. The first Amendment proposes to exclude from the scope of the tax compensation received by a tenant farmer in respect of damage to his interests as a tenant. The right hon. Gentleman did not elaborate the specific cases he had in mind, and I will return to that in a moment.
The second Amendment proposes a complete exemption from Capital Gains Tax whenever a farm and the fixed equipment is passed by way of gift or death. This would be a very wide exemption, and an expensive one. At the stage of the full development of the tax it is estimated that the cost would be about £5 million. It would, of course, be an extraordinarily generous exemption, singling out farming for a favour in this respect which no other section of the community would enjoy. It is certainly not our intention to grant any such exemption and I cannot see any reason for it in principle nor in what has been argued.
The right hon. Gentleman, in general terms, sought to suggest that the whole of the farming industry was plunged into dire straits and could look forward to a bleak future. It is difficult to reconcile that with the references which have been made to the difficulty of acquiring another farm or a farm at all. We have heard that argued during these debates and it is relevant to some of the matters we have to consider.
There are specific problems and I should like to direct attention to them. First, the right hon. Gentleman asked us to consider the case of a farmer who acquires a farm as a young man, works it for 20 years and then decides to take his son into partnership. The right hon. Gentleman suggested that as a result of the Capital Gains Tax 30 per cent. would have to be paid on the whole of the capital gain, the increase in the capital value of the farm, so far as that fell subject to charge. That is not so. He would pay only on that part of the interest in the farm which was transferred to his son. If there were a 50–50 partnership, or if he made a gift of half of the farm to his son, that would be the occasion for a charge only on half of the total capital gain of the farm. If, later, the


son acquired the remaining part, or on his father's death, he would fall liable to pay Capital Gains Tax on the remaining part, subject, in that case, to the death exemption of £5,000.
4.0 p.m.
We have heard about cases which particularly concern hon. Members. First was the case of a farmer who moves out of one farm and into another. It may be a question of the sale of one and the purchase of the other, or the exchange of one farm for another. In that case, as was said by my right hon. Friend when dealing with an earlier Amendment, that situation would he covered by the provisions of Clause 31, relating to the transfer of business assets. In that situation, the farmer who realises a capital gain on his first farm would be able to defer paying the tax by treating the acquisition of the new farm as a replacement of the old. He is then deemed to have acquired the new farm as a replacement for the old, to the extent, of course, that the acquisition of the new farm covers the amount which he has received in the disposal of the old.

Sir Charles Mott-Radclyffe: This is a very important point. To get the benefit of this accrued business asset under Clause 31, which has a direct bearing on the Amendment, can the farmer buy another farm in a completely different part of the country, of a completely different type and with completely different equipment? If so, how does the hon. and learned Gentleman think that the valuation of the farm which he is going into and that of the farm which he is leaving will be so close to each other that no claim for Capital Gains Tax will be made?

Mr. MacDermot: Mr. MacDermot They do not have to be so close to each other. The farm can be in any part of the country, provided that he is carrying on the same trade or business. He does not have to show that he is pursuing the same kind of activities in that trade or business, so there can be variation in the type of farm which he moves into. Suppose that the new farm, plus all the machinery—this covers plant and machinery as well—is more expensive than the one he has disposed of. It is to the extent that the cost of the new farm covers what he

has acquired on the old that he can operate the transfer. There will be an apportionment, in other words—

Mr. Peter Bessel: What of the case of two farmers who decide upon an amalgamation? If, upon valuation, there is discovered to be a cash advantage in the case of one farmer, the second farmer pays him the balance and the first then uses the money which he has acquired to buy additional agricultural machinery or equipment, would he be affected by this tax'?

Mr. MacDermot: I have not followed the hon. Member's example, but I would ask hon. Members to save time by allowing me to pursue the argument on one line at a time. The hon. Member for Bodmin (Mr. Bessell) has raised a different subject, that of amalgamations—

Mr. R. J. Maxwell-Hyslop: On a point of order. I think that it would be most helpful to the Committee, Dr. King, if we could know the extent to which we shall be able to discuss Clause 31, which we have not yet reached, on this Amendment. I am becoming a little puzzled, as the Financial Secretary is going so deeply into Clause 31.

The Chairman: I must contribute to the hon. Gentleman's puzzlement. We cannot discuss Clause 31 on this Amendment.

Mr. Jasper More: We are now discussing change of farm. Surely the Amendment deals with change of ownership of the same farm.

Mr. MacDermot: The reason that I raised this point is that I am coming to the question, on the first Amendment, of the compensation received by a tenant farmer. I was not sure which compensation the right hon. Member for Rushcliffe (Sir M. Redmayne) and his hon. Friends had in mind. For example, where a tenant farmer is protected under the Agricultural Holdings Act, he may be induced by his landlord to leave because the landlord wants to sell the vacant possession. He is paid a premium to do so, and this is a form of compensation. This is the realisation by him of the value of his asset, namely, his tenancy.
This could be the occasion for a charge to Capital Gains Tax. If he then wants


to move into another farm, which he usually will, he will probably have to pay a premium again in order to be able to acquire the new farm. This seems to me to be related to the Amendment. This, also, would be covered by the provisions of Clause 31. We can discuss that in more detail when we reach Clause 31.

The Chairman: Would the hon. Member speak up a little?

Mr. A. P. Costain: Mr. A. P. Costain (Folkestone and Hythe) rose—

Mr. MacDermot: I will give way at the end, if I have not covered points which hon. Members have in mind.
The other type of compensation which a tenant farmer may receive which is covered by the first Amendment is a case in which there has been an acquisition by an authority having compulsory purchase powers of a part of the land of which he has been the tenant, perhaps to drive through a road. He gets compensation for the value of that part of his interest and for the injurious affection to the remainder of his land. On the basis of the apportionment of the value of his interests, this may result in the realisation of a small capital gain, on which he is subject to charge.
If there is no question of his removing to any other farm, he will be subject to charge for that compensation. There will be no exemption and I cannot see any argument or reason that there should be. He is receiving a main payment for the realisation of a capital asset and there will be in the circumstances perhaps a liability to Capital Gains Tax for part of the cash payment.

Mr. F. V. Corfield: Surely the Financial Secretary appreciates that the compensation in respect of injurious affection is in relation to the loss of profitability for the future. Surely it would be quite outrageous to regard this as a capital gain, particularly in the circumstance in which it has been forced on the farmer and in which he has no choice as to time and when he may not be able to find a farm within the year. Five years might be more sensible.

Mr. MacDermot: If that is the kind of intervention which hon. Members are to make, I shall abandon the practice of

giving way as much as I have. The hon. Member for Gloucestershire, South (Mr. Corfield) wants to argue the case, going back to the major principles which we have argued already. He is now saying that involuntary realisation should not be subject to charge by way of Capital Cains Tax. In so far as that relates to compulsory purchase, it is the subject of a later Amendment to the Clause. I will gladly give way to answer particular points on what I have said, but I suggest that it will only prolong our discussions if interventions are only by way of argument—

Mr. Corfield: With all due respect to the Financial Secretary, he raised the question of injurious affection and this was the point to which I was directing my intervention.

Mr. MacDermot: Of course it was, and it was by way of argument. The hon. Member was saying that, because compensation for injurious affection is compensation in respect of rights which have a prospect of future profitability, it should not be subject to a Capital Gains Tax. If this argument is followed through, it will mean that anyone who disposes of land at a considerable profit, because of its prospective development value, which is one of the main ways in which capital gains are realised on land, should not have to pay any Capital Gains Tax—

Mr. Maxwell-Hyslop: Will the hon. and learned Member give way?

Mr. MacDermot: No, I will not.
The second Amendment is based on a case which we have considered a number of times in Committee and which has aroused a good deal of interest and sympathy, and it is one to which the right hon. Member for Rushcliffe referred again. That is the case of the disposal of a farm handed on, perhaps, by a farmer to his son. This is a particular example of something which we discussed yesterday, namely, the problem of the assessment for Capital Gains Tax on a passing on, on death, of a small business in circumstances in which the imposition of the tax at that stage could cause great financial difficulties to the person inheriting the farm, because of the difficulty, perhaps, in raising the finance to pay the tax.
I said yesterday that there was a real problem here and I said that I would look into it. We will be coming to the question of the man who disposes of a small business in similar terms—on retirement, perhaps to provide for his retirement—and there is obviously an analogy here. What I have in mind is that we should consider that in relation to this question of farming land. Apart from that—which, as I say, I regard as a special case—I do not see any reason or grounds why farming land as such, or an interest in farming land, should be singled out for special treatment compared with any other form of capital gain.

Mr. More: I strongly support the Amendment. Having heard the remarks of the Financial Secretary I must tell him, with respect, that I am glad to see on the Government Front Bench the Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food who, perhaps, is able to see not only the economic consequences of the Clause as drafted, but also the social consequences on traditional farming procedures in Britain.
Farming and agriculture, particularly the small family farmer, face a direct attack from the Bill. Harm will be done not to the man who sells, because anybody who is prepared to go out of farming knows that he will face Capital Gains Tax on the proceeds and can assess what the consequences of that will be. As values are today he can be fairly certain, with or without Capital Gains Tax, that he will come out reasonably well in the end. Damage will be done to the person who wants to stay in farming. That is the person we are trying to protect.
What will be the position of a man who, upon the death of his father, takes over the family farm? There will be superimposed on the death duty this additional tax. If the father decides to do the sensible thing and retire—rather than, as is so often the case, continue to work past what are regarded as the normal working years—and hands over his farm to his son, what will be the result then? The son must pay the Capital Gains Tax on that farm. If the father takes the sensible course and retires or if he dies, his son must pay the Capital Gains Tax either way.
Under the Bill as at present drafted a large cheque will have to be written to pay the tax and capital will be taken out of farming enterprises and passed to the Treasury. Since the war we have encouraged the agricultural industry to spend more and more money on modernising and improving. The Bill is a direct temptation to the farmer to say, "Let us chuck it up and sell the farm".
I hope that the Financial Secretary appreciates—for I am sure that his hon. Friend the Joint Parliamentary Secretary understands this—that small farms will pass to either businessmen with capital or large farmers who consider that they can manage their own farms more economically by taking an additional acreage. It will mean death for the small farming community in either case. I urge the Financial Secretary to realise the wider social and human aspects involved here and not to consider it merely as a Treasury matter. It is vital for the agricultural industry that the Clause should be amended and I hope that the hon. and learned Gentleman will take another look at this matter.

4.15 p.m.

Mr. Paul Hawkins: Although the question of injurious affection is not my main topic today, and here I should perhaps declare my interest in that I am a valuer and chartered surveyor and come across these cases regularly. If a road is driven through a field, leaving what in Norfolk we call a "scutey" piece of land—which is more difficult to farm and is much less valuable—surely the Financial Secretary did not mean to suggest that that bit of compensation should rate for Capital Gains Tax?
If the Amendment is not accepted the small farmer will be the hardest hit. It will mean, in many cases, that when the son of the family takes over his father's farm he will have to sell off two or three fields to pay the Capital Gains Tax. This will result in a considerable fragmentation of some of the medium and smaller-sized farms.

Mr. Emrys Hughes: To whom will the small farmer sell his land?

Mr. Hawkins: Presumably to somebody else.
As I was saying, it will mean that the smaller and medium-sized farms will be split up. Has not the Ministry of Agriculture, Fisheries and Food been doing its best to prevent that from happening? Indeed, I understand that talks are now proceeding between the N.F.U. and the Ministry aimed at the establishment of larger rather than smaller farms.
Much has been said about compensation for goodwill. What will be the position of the goodwill of a tenant farmer who is affected by compulsory purchase? The goodwill at present applicable in such a case is already derisory and no tenant farmer can move into another farm on his present compensation—that is, even if he is able to find a farm at all to let. I understand that this is also the subject of discussions between the N.F.U. and the Ministry. To place an additional tax on such compensation is an injustice. I hope, therefore, that payments for goodwill of this sort will be exempted from Capital Gains Tax.

Mr. Bessell: The effect of the tax on people in the war west of England and constituences like mine in Cornwall, where there are about 2,000 small farms and where the whole economy of the county is largely dependent on the prosperity or otherwise of those farms, will be extremely serious.
Since the main argument has already been discussed by several hon. Members, I will confine my remarks to two points. First, what happens in the case of a widow who, on inheriting a small farm, finds herself unable to manage it and is compelled to sell it? Would she be in a position where she has to pay Capital Gains Tax on any profits made, because I believe in many cases this would cause serious hardship? There are cases where farmers' widows are quite unable to maintain the land themselves and are reluctantly compelled to sell it, perhaps to a neighbouring farmer.
The second point, which I tried to make during an interjection a few moments ago, is what happens in the case of two farmers, who, deciding upon amalgamation, are bound, in one case, to be in possession of a farm of greater value than the other?

Mr. MacDermot: By amalgamation does the hon. Gentleman mean that the

two farmers decide to go into partnership and farm the two units as one?

Mr. Bessell: Yes. One farm is bound to have a greater value that the other and the owner of this obtains from the second farmer a sum of money in compensation. He decides to use that money for a joint enterprise, perhaps buying additional equipment. In this case, would he be subject to the tax?
I ask the Financial Secretary to give careful attention to this subject, especially in view of the effect that it is likely to have upon small farmers. I am sure my hon. Friend the Member for Cornwall, North (Mr. James Scott-Hopkins) would support my view that this is a matter which seriously affects us in the West Country.

Mr. Emrys Hughes: The right hon. Gentleman the Member for Rushcliffe (Sir M. Redmayne), who opened the debate, spoke rather emotionally about the son of a small farmer and the effect the Capital Gains Tax will have upon him. I too am interested in the sons of farmers in Ayrshire because one of the principal grievances is that when the sons of the farmers grow up they are unable to get farms. I do not think that the Capital Gains Tax is the main source of grievance here.

Mr. Peter Mills: Rents.

Mr. Emrys Hughes: I am amazed at the intelligence of the hon. Gentleman. He is far more perspicacious than hon. Gentlemen on the Front Bench, because in all these discussions so far there has never been one mention of the most indecent word one can mention in these discussions on farming questions—rent.

The Chairman: It is not only indecent. It is out of order.

Mr. Hughes: I understand that obscenity is out of order, but I can make an analogy. The analogy I make is between capital gains and rent because the argument is very much the same.

Mr. Geoffrey Wilson: Does the hon. Gentleman appreciate that in a large part of the country, particularly in the West, there are no tenant farmers? They are owner-occupiers. The question which the hon. Member for Bodmin (Mr. Bessell) is raising is very pertinent.

Mr. Hughes: When the hon. Gentleman talks of the West he should not imagine that the west of the country is confined to that small and rather insignificant peninsula called Cornwall.

Hon. Members: Shame.

Mr. Hector Monro: Would the hon. Gentleman not agree that the Scottish Milk Marketing Board which covers South Ayrshire has issued figures which show there are 44 per cent. tenants and 56 per cent. owner-employers?

Mr. Hughes: That is sufficient for my argument. I want to speak to the 44 per cent. When discussing the question of capital gains one inevitably comes across the question of rents. I want to introduce this element into the discussion because it is a far greater burden upon the farming industry than the Capital Gains Tax.

The Chairman: Order. This may be true. I do not question the rightness of the hon. Gentleman's observation, but he must address his remarks to the Amendment we are discussing.

Mr. Hughes: The argument has been that the enterprising, industrious farmer is to be robbed by the ruthless, wicked Chancellor of the Exchequer. If these Amendments are carried it means that the Chancellor has £5 million less. If right hon. Gentlemen wish to show their goodness they can lead a movement in the party opposite, a self-denying ordinance that rents be reduced by £5 million to make this up. To that, there will be no response. The whole idea that hon. Members of the party opposite are the friends of the small farmer and are helping him is misplaced. Politically, they are the biggest enemies of the small farmer, because they are the party of the landlords.

Mr. Anthony Fell: Rubbish.

Sir Richard Glyn: Will the hon. Gentleman accept what the N.F.U. has repeatedly stated, that the cheapest capital available to any tenant farmer is his landlord's capital?

The Chairman: Whether he does accept the view of the N.F.U. or not, has nothing to do with this Amendment. I hope that hon. Gentlemen will not tempt the

hon. Member for South Ayrshire (Mr. Emrys Hughes) to get out of order.

Mr. Hughes: I have already said that, like Oscar Wilde, I can resist everything except temptation. There is always a conspiracy on the part of hon. Gentlemen opposite to get me out of order.

Mr. Bessell: Before the hon. Gentleman leaves the question of landlords would he not accept that it is impossible for a landlord to charge a high rent to a tenant farmer today. If he did the tenant farmer would simply quit because he would be unable to pay it on his present income.

The Chairman: Order. I wish hon. Gentleman would take notice of what the Chair is saying. We are not debating rents. We are debating an Amendment about taking the capital gains of farmers and the hon. Gentleman who has the Floor must keep to that question.

Mr. Bessell: Further to that point of order. May I point out that the hon. Gentleman was specifically referring to landlords and tenants in relation to this particular Amendment. I was seeking to reply to it.

The Chairman: If the hon. Member will cast his memory back, I have already drawn his attention to the fact that he was out of order and had asked the Committee not to encourage him to be out of order.

4.30 p.m.

Mr. Hughes: I may have been wrong, but I thought that I heard an impassioned and emotional appeal for the small farmer's son who, as a result of the Capital Gains Tax, will be forced to sell his land, or leave farming altogether. The hon. Member, who declared an interest—

Mr. Archie Manuel: How many sons has he got?

Mr. Hughes: I shall not go into that. I am interested in the exodus from the land, not in Genesis. An hon. Member opposite said that small farmers would be ruined by this tax and would have to sell their land to someone else. I asked him to whom they would sell the land—

Mr. Maxwell-Hyslop: Might they not sell it to someone who wanted to buy


an estate to be a hobby farmer, like the Minister of Housing and Local Government?

Mr. Hughes: Hobby farming is causing a great deal of anxiety in the agricultural industry at present. I object to hobby farming. I want the land to be used for the benefit of the country, and not treated as a hobby.
I am anxious about the farmers' sons. What will be the future of the farmer? Are they likely to be worse off or better off as a result of the Capital Gains Tax? That tax is not the anxiety in the minds of farmers in Scotland at present. It would do hon. Members opposite good to read carefully the pages of the best agricultural paper there is—the Scottish Farmer. There they will see that the main question being discussed is security of tenure. That is the real issue that is perplexing the farmer's son today—

The Chairman: Order. Again, that may be true, but the hon. Gentleman must raise it on some other occasion, and not on this Amendment.

Mr. Hughes: The occasion was opened out to me, Dr. King, by various remarks on the other side of the Committee. I was trying to explain the point of view of my constituents.

Mr. Henry Clark: Would not the hon. Member be better employed in instructing his farmer constituents of the dangers into which the Bill is taking them, rather than advertising their appalling ignorance in the Mother of Parliaments?

Mr. Hughes: I do not think that my farmers can be accused of appalling ignorance. They are the best farmers in this country, and they know their difficulties. If the hon. Gentleman seeks enlightenment, I advise him to study the columns of the Scottish Farmer. Someone there gives the reply to hon. Gentlemen who say that the Capital Gains Tax will bear hardly on the small farmer. The writer says:
A farmer has now even less security than the tenant of a council house, and it is high time, in my view, that the Act was sufficiently amended to allow a son to benefit from the expenditure and the improvements which may have been effected on the farm by his parents.
I suggest to hon. Gentlemen opposite that instead of concentrating their argu-

ments on the Capital Gains Tax they should co-operate with those of us who want to remedy a grievance by amending that Tory Act—

The Chairman: Order. Again, that may or may not be true, but the hon. Gentleman must raise his alternatives on some other occasion than this Amendment.

Mr. Hughes: I quite understand the difficulty, Dr. King, when trying to pick up some of the arguments brought out by the other side. I have been trying to deal with such arguments, but I suppose that I shall have an oportunity of developing them later.
I want to argue, as I argued yesterday, that there are capital gains of small farmers and of big farmers which should be taxed, and I should like hon. Members opposite, if they can to give me their views on the following case. I have referred to two sheep farms, comprising 2,128 acres, which have recently been sold for £97,750. I do not see any injustice at all in my right hon. Friend the Chancellor of the Exchequer telling the person who got the £97,000 that he is entitled to pay back to the community in the form of Capital Gains Tax some of the money he has collected. That is the essence of the argument—

Mr. James Dance: Does not the hon. Gentleman think that if a man takes on a farm that is in a bad state, farms it well, puts a lot of money into it and subsequently makes a profit, he is entitled to retain that profit, when he has farmed the land well as opposed to someone who lets the land run down and, obviously, cannot get the same value at the end?

Mr. Hughes: I do not see why, when a farmer puts a lot of labour and energy into the land, the landlord should be entitled to a huge profit without having to pay a good deal of it back in the form of Capital Gains Tax. This is the absolute argument that has to be answered. Sheep farmers on the hills of Lanarkshire have toiled year after year building up their industry and then those two farms of 2,128 acres are sold for the fabulous sum of £97,750 as a result of the labour of the farmers—

Mr. Timothy Kitson: That represents £40 an acre.


Could the hon. Gentleman say what was paid for the land? I think it rather a low figure.

The Chairman: Order. May I make two observations? One, which I made late last night, is that many hon. Members are getting into the habit of not speaking up. Even I did not hear that question. The other is that many interventions prolong speeches.

Mr. Hughes: You cannot accuse me of not trying to speak up, Dr. King.

Mr. Kitson: The hon. Member is surely quoting very strange figures. This land was sold at only £40 an acre. As that does not seem very much, I am asking what the farmers paid in the first place?

Mr. Hughes: These are hill farms. I am sorry to have to explain elementary facts to the hon. Member. These are Lanarkshire hill farms on which they rear sheep, and they were owned by the Leader of the Opposition. If the hon. Gentleman would like it, I will conduct him round the farms, and he will then see the justice of my case. The farms in question are situated within 30 miles of where I live, and what has gone on there has been the subject of one of the most interesting discussions in agriculture in south-west Scotland for the last 10 years.
Are farmers and their sons to work hard in order to make substantial gains for landlords? That is precisely what is going on. All this talk about the Chancellor of the Exchequer being the exploiter of the small farmer is so much humbug. The exploiter is the rich landlord who is typified by the Leader of the Conservative Party. [HON. MEMBERS: "Oh."] I know that you do not like it—I am not speaking of you, Dr. King, perhaps you do. I am putting this argument in a way that people in the southwest of Scotland would understand.

Mr. Dance: Do not believe it.

Mr. Hughes: Is there a case to be made for an idle absentee landlord making an enormous sum of money when a young farmer wants to buy land? That is the real burden on agriculture. There can be no argument that these gains should be taxed in the interests of the

community. All this talk about the poor, struggling small farmer being ruined by the Chancellor is so much humbug and hooey. The real enemy of the small farmer is the exploiting landlord.

Sir Tatton Brinton: Have the somewhat disorderly ramblings of the hon. Member for South Ayrshire (Mr. Emrys Hughes) any relationship to the two Amendments we are discussing? It would appear, Dr. King, that he must be willing to vote for Amendment No. 265 and against Amendment No. 367. Will you allow a separate Division on Amendment No. 265?

The Chairman: Order. What the hon. Member of South Ayrshire (Mr. Emrys Hughes) has said is not a point of order at all.

Sir T. Brinton: Is it not in order to ask whether you will allow separate Divisions on the two Amendments?

The Chairman: I thought that the hon. Member was asking the hon. Member for South Ayrshire what he would do.

Sir T. Brinton: No, Dr. King, I was asking, in view of the obvious difference, whether you would allow a separate Division on Amendment No. 265.

The Chairman: A speech of an hon. Member does not necessarily compel the Chairman to change his mind about Amendments which are selected.

4.45 p.m.

Mr. Aidan Crawley: I want to speak only shortly and not to engage in a debate with the hon. Member for South Ayrshire (Mr. Emrys Hughes), who seems to be under the impression that no small farm is bought by a small farmer. In my part of Derbyshire, where there are as many small farms as in any part of England, the opposite of what he has suggested is true. Most of the farms of 25 or 30 acres coming on to the market will be bought by small farmers, not by large farmers. Large farmers bid for them, but over and over again they are bought by small farmers and a very small percentage are amalgamated with larger farms in West Derbyshire.

Mr. Emrys Hughes: Is it not a fact that the farms are bought at a greatly increased price?

Mr. Crawley: No, sometimes the prices are fairly constant. What is surprising is that small farms are bought by people who wish to continue small farming, difficult though they may find it. The situation in my part of England is exactly the opposite of what the hon. Member has described as happening in Ayrshire.
I support everything which was said by my hon. Friend the Member for Ludlow (Mr. More). I do not want to repeat the arguments used last night. I understood that the Financial Secretary is to look at the question which arises when a farm is sold or the farmer dies and Capital Gains Tax comes into play. I ask if the hon. and learned Gentleman is aware of how compensation or compulsory payment for roads and other things works. I shall give an example of what happened to me. I had a small farm in Buckinghamshire. I do not have it now so I do not have to declare an interest in this matter. The electricity board wanted to put a transformer into a field on that farm. It paid me a small sum—I forget now how much. Then a transformer had a faulty earth.

Mr. MacDerrnot: Is the hon. Member assuming that the whole of the payment he got would be a capital gain?

Mr. Crawley: That is what I understood the Financial Secretary to suggest. If not, I shall be glad to hear it. This was compensation for inconvenience. I had understood that such a payment would be subject to Capital Gains Tax.

Mr. MacDermot: The payment would be compensation for loss in the value of the land as a result of the acquisition. If that compensation resulted in the hon. Member realising a capital gain, that is to say, a gain compared with the price or the apportioned part of the price apportioned to that piece of land on which it was paid, it would be subject, but it does not follow that there would be a gain at all.

Mr. Crawley: That is the whole difficulty. How could one calculate what the gain would be?

Mr. Joel Barnett: The hon. Member for Derbyshire, West (Mr. Crawley) is under a misunderstanding. If he received a compensation it would be not because the electricity board took the piece of land, but be-

cause it put him to inconvenience and loss of profit incurred through that inconvenience. The fusing of the wiring would be subject to normal compensation.

Mr. Crawley: The payment was, in fact, both and part would be subject to capital gains and part to ordinary income. The transformer was faulty. I awoke one morning to find four of my best cows were dead because they had been grazing near the transformer. Luckily, neither I nor my children had been there, or we might have been killed. Then the question of compensation arose. The compensation was below the market price, but it could have been argued on some grounds that it was above the market price and there could have been a capital gain. How would the Financial Secretary assess these things?

Sir Richard Glyn: I do not propose to detain the Committee for more than a few minutes. I hope that presently the Financial Secretary will clear up some of the points which have been raised and perhaps also dispel the fog of Scottish miasma which flowed from the speech of the hon. Member for South Ayrshire (Mr. Emrys Hughes). A great many people, both in the Committee and outside, are very seriously worried about the application of Capital Gains Tax to freehold farms which change hands, not through the choice of the owner and not through a deliberate sale—a case could be made for that—but on death or compulsory purchase.
In my constituency the great majority of small farms are owner-occupied. In many cases, they have been in the same family for generations, indeed for centuries, and handed down from father to son. Because of the fall in the value of money over the years, each time such a farm changes hands it would be valued at a higher price, not because the farm is intrinsically of more value but because the £ is worth less. If it be the case that each of these involuntary changes added a higher price in terms of money, the transaction would be subject to Capital Gains Tax and the heir taking over would have only one option, to sell the farm or part of it. He has no other money. In these cases the whole family fortune is in the farm. Often it is worked on a mortgage or an overdraft.
What can such a person do? He can go out of farming altogether—which is the last thing he would want to do as he has been farming for years and is not equipped for any other work—or he can sell a portion of his farm. In most cases, it would be bought by a farmer whose land adjoins the farm, or it would be snapped up by someone who wants to start as a small farmer. That would be done by the aid of a bank.
We shall then have in this country, what we have avoided for centuries, namely, fragmentation of farms. This has been the curse of the whole of the Continent. For reasons which I need not go into now, because I might be out of order in doing so—they are reasons connected with inheritance laws—there has been constant fragmentation of farms all over the Continent, and they are busy now at enormous expense and with great difficulty—it is a great social problem—trying to amalgamate the farms which have been fragmented.
This tax will result in farms being fragmented. This will introduce a wholly unfortunate and undesirable factor which must have the effect of fragmenting farms some of which are already too small. During the period of the last Socialist Government there was a pilot scheme in Somerset, not far from my constituency, to bring together farms which, in the dim ages, had been fragmented. They tried to bring them together. They saw the necessity of doing it. The attempt was not very successful. Now the Labour Government are to do the very thing which they know to be wrong, if they insist upon imposing a so-called Capital Gains Tax every time a farm changes through death—not because the farm has appreciated in value, but because the £ will have depreciated.
The same thing will happen if a farmer has his farm taken from him by compulsory purchase. I ask the Committee to think about that situation. A farmer owns his farm. His whole fortune is in it. It is his business. It is all he has. It is taken from him for the purpose of building or for some other public purpose. This is being planned all over the country, particularly in my constituency. It is being planned on a large scale. The farmer will be given the market value of his farm, which would enable him, if he kept all of the money, to buy

a comparable farm and set up in business somewhere else. If the Government say, "You are being given more than your farm was worth on such a date"—

Mr. MacDermot: Was not the hon. Gentleman here when I made my speech?

Sir Richard Glyn: Yes, I was.

Mr. MacDermot: I dealt directly with this point.

Sir Richard Glyn: I am following on from this. If this point is conceded, I am happy. I am simply saying that it would prevent that farmer from buying a comparable business somewhere else if some of the money was taken in Tax. That must be the effect. If some of the money is taken in Capital Gains Tax, the farmer will be unable to buy a comparable business.

Mr. MacDermot: I was trying to make clear that this is just what will not happen. If the farmer buys another comparable farm within 12 months of the disposal of the first, or he can buy the new one 12 months before he gets out, if the Committee accepts an Amendment which we shall reach later in those circumstances that will be regarded as a transfer under Clause 31 and he will not have to pay the tax.

Sir Richard Glyn: I am coming to that. I am seized of that point. The suggestion that the farmer could buy another farm before he has sold his own farm simply does not arise, because what would he buy it with? He has no capital. It often takes two or three years' hard work to find a new farm when a farmer has been dispossessed by compulsory purchase. I know cases of farmers who were dispossessed two years ago and who still have not found anything comparable which they can buy.
The last Socialist Government offered farmers the alternative of the herd basis structure. If they wished to have their breeding cattle on the herd basis, it was not to be subject to any taxation. Farmers stood the risk of loss; if they showed a loss they carried it. If they showed a gain, they could keep it. I want to know how this stands under the Bill. People are very seriously worried about this. I say at once that I have no appreciable interest


in this. I sold my herd almost completely during the last two years. I am speaking for other farmers who are seriously concerned about this and who would like an assurance.
I want to spend a few moments dealing with the points raised by the hon. Member for South Ayrshire. We have got into a position now where in Great Britain as a whole—Scotland seems to be lagging behind on this, as it does in so many things—the great majority of farming land is owner-occupied. [Interruption.] These facts are published. They are in the Government statistics. If the hon. Member for South Ayrshire does not like it, he must argue about it with his hon. Friends. The great majority of farm land is owner-occupied. The great majority is farmed by the owner. There is no question of tenants in their case.
The hon. Member for South Ayrshire is obsessed by the question of landlordism. I am told that he was for a long time closely associated with an organisation which was itself a large landlord in Scotland, and this perhaps has coloured his thinking. I assure him that, agriculturally speaking, in the country as a whole the owner-occupier farmer is a much more typical example.

Mr. Emrys Hughes: It is possible to ramble all over—[HON. MEMBERS: "Oh."] I mean all over the country. I am talking about the country, not about the rules of order. The question is whether my argument applied to Scotland. I do not pretend to speak for the south of England. I say that my arguments were relevant to the south-west of Scotland. If I am wrong, could the hon. Gentleman deny one fact and reply to my argument about the big landlord getting all that money for two farms?

Sir Richard Glyn: In Scotland, as in England, the tenant farmer could hardly manage if it were not for his landlord's capital. I am talking about capital, and I hope that I am in order in doing so. If it were not for the capital which the landlord provides so much cheaper than the bank, the tenant farmer could not succeed.

The Earl of Dalkeith: Would my hon. Friend bear in mind that Scotland certainly does not lag behind in these matters? I am sorry that

my hon. Friend should think that it does. Further, would he in future dismiss from his mind what he hears from the hon. Member for South Ayrshire (Mr. Emrys Hughes), because the hon. Gentleman's every utterance on the subject of land shows how totally out of touch he is with the facts of life? The imagination boggles to think that there are so many people in South Ayrshire who go on electing the hon. Gentleman time after time.

Sir Richard Glyn: I apologise if I have been led into a misunderstanding. I have been judging Scotland by the remarks of the hon. Member for South Ayrshire. I apologise to the rest of Scotland. What I said must be confined to Ayrshire only.

The Chairman: We now get back to the Amendment. Captain Orr.

Mr. Emrys Hughes: On a point of order. I am rather doubtful about a point I put earlier in the debate, whether a speaker in this debate should not declare his interest. I raise this matter because the last speaker is one of the biggest landowners in Scotland.

The Chairman: I answered that question when the hon. Gentleman asked it yesterday or the day before.

Mr. Hughes: The hon. Gentleman should have declared his interest.

The Chairman: I refer the hon. Gentleman to the OFFICIAL REPORT and the answer to his own same question there.

Captain L. P. S. Orr: The hon. Member for South Ayrshire (Mr. Emrys Hughes) is at his most amusing when he seeks to delay the proceedings of the Committee and to prolong our debates. He may amuse us in this Committee, but, if his contributions to the debate were heard by some of the small farmers in Northern Ireland that I represent, there would be some very hollow laughter indeed. This is a very serious matter to us. The hon. Gentleman spoke about landlords and tenant farmers. It may not be realised that Northern Ireland has probably the highest proportion of owner farmers in the whole of the United Kingdom. There are very few tenant farmers. We have the most productive agricultural community in the world. They are mostly small farmers.
As I understand it, this proposal, if it is not amended in some way, will be almost catastrophic in its effect upon small farms in Northern Ireland. I am deeply disappointed in what the Financial Secretary said. After a very long time, he has come to the Committee and said that he will concede two questions. I should have thought that he had had plenty of time to consider them before now. I am deeply disappointed that he has not had something concrete to say upon this.
I wonder whether the hon. and learned Gentleman would clear my mind about what he said, because I am not quite clear. It is common form in Ulster for a small owner farmer who comes to what he thinks is a reasonable retirement age after a lifetime of work on the farm, in which one or more of his sons has been helping him, to hand the title deeds of the farm over to a son.
5.0 p.m.
As I understand, at present that transaction will attract Capital Gains Tax. The farmer does not have to die. He simply has to hand the title deeds over to his son and Capital Gains Tax will be attracted on the improvements on the value of the farm. I take an example, not quite typical, of a farm of 250 acres which in Ulster would be a large farm. Let us say that the value of the land is now about £100 an acre and the man who is at present farming it decides to retire in 30 years' time. It is reasonable to assume that in that time the farm would have doubled in value and would be worth £50,000.
Am I not right in thinking that at that point, in 30 years' time, when that farmer passes the farm over to the son and simply hands over the title deeds and there is no other consideration between them, except the understanding that the father will live on the farm for the rest of his life, there would be approximately £8,000 to be found by the son, somehow or other? The tax takes no account of improvements or any capital investment that may have taken place on the farm in the meantime. The son cannot find that money without selling a portion of the farm. My hon. Friends are absolutely right in saying that this will lead to the further fragmentation of farms. May I have the Financial Secretary's attention?

Mr. MacDermot: The hon. and gallant Gentleman has my attention. He is asking me questions and he appreciates that I want to be able to answer them accurately.

Captain Orr: I am obliged. I was not accusing the hon. and learned Gentleman of any discourtesy. I just wanted to be absolutely sure that he knew what I was asking.
When the hon. and learned Gentleman says that he will look again at this subject, will he also look at this problem and not confine his future considerations to what happens on death? It is not only what happens on death that is important but what happens also on retirement. The hon. and learned Gentleman appears to be nodding his head. I conclude from that that he will consider this point, but I wish that he would say something more concrete.
There is great anxiety at the moment about this. It is common form that farmers in Ulster insure against Estate Duty. I am not sure whether they can insure against Capital Gains Tax, but however they meet it this will be an almost intolerable burden on highly efficient and productive small-farm agriculture in Ulster. I hope that the hon. and learned Gentleman will have something more concrete to say to us before the debate is over.
All I can say to farmers in my constituency is that they should not worry too much. I do not think that the Government will last very long. If this intolerable burden is placed upon the farmers, my hon. and right hon. Friends will speedily readjust it when they return to office.

Mr. Dance: I would remind my hon. and gallant Friend the Member for Down, South (Captain Orr) that if we have Price Reviews of the kind that we had recently the value of land in Ulster possibly will not go up to the extent that he thinks it will.
I want to emphasise the words of my hon. Friend the Member for Dorset, North (Sir Richard Glyn) about the appalling situation which will affect owner-farmers farming on land which is compulsorily acquired. This applies in my constituency, where we are to have the new town at Redditch and many


farmers are extremely worried about the future.
It is all very well to say that if they find a farm within a year the Capital Gains Tax will not apply. Already farmers in my constituency are looking round and cannot find alternative farms. They may have to wait two or three years before they find a farm which will take the place of the one acquired from them much against their wishes. Even if they find one they may have to pay at an enhanced rate over the compensation which they will receive. How wrong it is that they should be compelled to pay Capital Gains Tax on any profit which has accrued during the time they have owned the farm.
I realise that the Financial Secretary has given some assurances and I ask him to make it absolutely positive and clear to the farmers in my constituency and the people in Redditch what he means and how they will be placed. If they do not find another farm with a year, will they have to pay the Capital Gains Tax, or will that be held over until they have found the farm? I hope that the hon. and learned Gentleman will give a true, forthright and categoric answer.

Mr. Peter Mills: I should like to refer, first, to what the hon. Member for South Ayrshire (Mr. Emrys Hughes) said and to put the matter right. It is absolutely monstrous to talk about Cornwall as an insignificant part of the country. In my experience, if anybody can farm in Cornwall he would make a fortune anywhere else; and this is quite something for a Devonian to say because we do not normally have friendly relations.
Landlords have been much maligned today. I know many good landlords who have given young men the chance of farming. I pay tribute to them. The hon. Member for South Ayrshire has not only a bee in his bonnet about landlords, but his mind is particularly warped on the subject. I am sorry that he is not now here to hear me say it.
The Capital Gains Tax will have a serious effect on small farmers and particularly on their sons. It will mean a great reduction in the number of young people who enter farming. It has not been easy for them to enter farming during the last five or six years and pos-

sibly longer. As I said, the Capital Gains Tax will mean a further reduction in their numbers. This is a great pity. When I go round villages in my constituency one of the first questions that I am asked is about what I intend to do about opportunities for young people to enter farming. In future many more farmers' sons will not have the opportunity of entering agriculture.
Another problem is that of the farmer who is about two or three years from retirement. Perhaps he has a large overdraft, and he will now have to find a considerable sum of money for Capital Gains Tax. What will happen? The bank manager will start to withdraw his overdraft and things will become extremely difficult for him. It will be a real embarrassment. I hope that the Financial Secretary understands the point that I am putting. In such circumstances, the farmer will have to go out of business. The Financial Secretary knows that many farmers today are working on substantial overdrafts, and he must address his mind to the man approaching retirement as well as to the farmer's son.

Mr. Maxwell-Hyslop: The Financial Secretary has shown that he becomes angry when anyone argues a point of principle on an Amendment, but points of principle ought to be argued and he ought to be composed enough to listen with interest to what is said.
The Bill as drafted looks after lawyers. Clause 26(6) makes certain that no Capital Gains Tax is levied on a lawyer who is injured and who receives compensation for his injury. No one says to the Financial Secretary that, because his practice and standing and the amount of money he can get for going into court to represent people have grown over the last 10 years, Capital Gains Tax must be imposed upon any damages he receives if he is unable to follow his profession because someone has injured him. It would be said, rightly, that that was an involuntary tragedy which had overtaken the hon. and learned Gentleman—or some other lawyer, and it ought not to be taxed. But the farmer who does not ask someone to drive a road through his land, who does not ask someone to deprive him of his means of livelihood, but who is forced to sell nevertheless is called upon to meet this tax. In many cases, of course, a man will have to move.
The Financial Secretary has put the whole Committee in a very difficult position by pleading Clause 31 in defence of his rejection of Amendment No. 265. We have not reached Clause 31, so we cannot consider whether this Amendment should not be taken, because the hon. and learned Gentleman claims that Clause 31 makes it unnecessary. Yet he does not want the points of principle to be argued and gets angry about it. Angry he will have to be. He has put the Committee in an intolerable position.
This is an essential pair of Amendments. It is not good enough to suggest that the whole of the rest of the country is composed of professional men and that, so long as no professional men suffer in damages, everything is all right. All we are asking for is elementary justice for people whose livelihood depends on their land. If the Financial Secretary will do the same for them as he is doing for lawyers, for his own breed, we shall be happy on this side of the Committee.

Mr. David Webster: I endorse what has been said about the fragmentation of agricultural property. There are many small fragmented farms in my part of Somerset. In fact, this Capital Gains Tax is a capital levy for these people because, with inflation, the value of their farms has not increased at all. There has simply been a decline in the value of money. Since the last Price Review, there is no more capital-intensive enterprise than agriculture, particularly dairy agriculture as practised in my constituency. To put it in another way, there is no other means of livelihood which earns less on the capital invested. There is an exceptionally small return on capital, and now it is alleged that the value of the properties is rising simply because of the decline in the value of money. On top of that, taxation is to be imposed on these hereditaments after compulsory loss of the property.
There is injustice at both ends. One hears about burning the candle at both ends, and for the agricultural community of Somerset this is what is happening. My farmers have to be in dairy farming because the land is suitable almost entirely for that type of

production. The fields are often half a mile or a mile apart, and they have to be worked with a great deal of movement of cattle from one field to another. Inevitably, in the future, farmers in my constituency will have to dispose of more of their holdings if this tax is imposed. There will be more fragmentation and more distress in the agricultural community. I repeat that it is not a Capital Gains Tax but a capital levy at a time of decline in the value of money as a result of the inflation which is going on now and can be seen coming in the years ahead.

5.15 p.m.

Mr. Fell: I should like to know how the Government will get their money from this source. Our proposal that certain things should not be chargeable gains in respect of small farms is resisted, or almost entirely resisted, by the Financial Secretary. I have heard most convincing speeches from my hon. Friends, and, watching the hon. and learned Gentleman, I think that he has been strongly influenced by them as well. What worries me is that the man who is responsible, the Chancellor of the Exchequer—at least, one presumes he is responsible—is not here to hear all these speeches. If he were, he would be led to reconsider the whole question of these chargeable capital gains.
What will happen if the Financial Secretary is unable to move the Chancellor to accept this Amendment, or something like it, for farmers? He will not get his money. Presumably, the finances of the nation will become even weaker than they are rapidly becoming already. People will have less money. Banks will get tighter with advances. The Agricultural Credit Corporation and the Agricultural Mortgage Corporation will hardly be likely to finance farmers for this sort of purpose. The position will be as my hon. Friends have explained it. They cannot all be wrong. [Laughter.] It is all very well for hon. Members opposite to laugh, but, with the exception of the hon. Member for South Ayrshire (Mr. Emrys Hughes)—I wish he were here for me to tell him something—not one of them has even bothered to make a contribution, except for the very intelligent observation made by the hon. Member for Heywood and Royton (Mr. Barnett) a short time ago.
I have not heard all the Finance Bill debates, but I regard this Amendment as particularly important. The Chancellor of the Exchequer has not listened to all the debates on the Finance Bill, but he certainly ought to be here to listen to the Capital Gains Tax debates and to the other debates which are to take place.
We are in an astonishing situation in which it is clear to any reasonable-minded person that, if one is to have a Capital Gains Tax of this kind at all, the worst possible time to have it is during a very tight credit squeeze which, we are told, is to get tighter. How are the small farmers to get money to pay for the capital gains? I am sure that the hon. and learned Gentleman will do everything possible—I see that he is having his arm jogged all the time and I am sure that it is in the right sense—to find a way out of this situation.
It is all very well being sceptical about what we are saying, but he will come the most awful cropper on capital gains unless he listens to our sensible arguments. If the Government persist in this course they will either fragment small farms into smaller units or will bring them together into big farms for great corporations which might be able to afford to buy them. Certainly, fragmentation is the opposite of the Government's agricultural policy, which is to have larger and larger farms. I am against that, but that is neither here nor there.
Perhaps the answer is that the Government want to drive the small farmers out of business and into great amalgamations financed by the great corporations. If that is so, it is a perfectly understandable proposition. Whether we agree with such a policy or not is perhaps neither here nor there at the moment, but at least let the Government be frank about it. If it is their view that, by the impost of capital gains on small farms, they will drive these people out of business by fragamenting their farms or pushing them into larger units, we should be told.
The sooner they tell us that, the sooner the Government will go out of business themselves—quicker than the small farmers, one hopes. I hope that the hon. and learned Gentleman will have the greatest possible success in conveying the case to the Chancellor, who will

not have had time to read any Finance Bill debates at the moment. The hon. and learned Gentleman is faced with unanimity from this side and a complete lack of interest among hon. Members opposite although, to be fair, there are more of them here than has been usual during the proceedings in this Bill. I hope that the hon. and learned Gentleman will have the greatest success in explaining to the Chancellor that he must give way on this Amendment.

Mr. Anthony Stodart: I find the Clause most inconsistent with the general trend of agricultural policy, supported by both sides of the Committee during the last few years, in which one of the great features has been the injection of capital into agriculture in the form outstandingly of farm improvement grants and drainage schemes, all of which, as hon. Members will agree, have proved a first-class investment for the nation as a whole.
Despite the injection of this capital, there is a considerable shortage of liquid capital today, as can be seen by the figures of bank advances to agriculture. I was most disturbed when I heard the figures quoted by my hon. and gallant Friend the Member for Down, South (Captain Orr) about the possible amount of capital that would have to be found on a 250-acre farm on the farmer handing over to his son. My hon. Friend said the figure would be £8,000 and I have no reason to doubt that calculation.
But when a son succeeds his father, it is almost certain, as agriculture has evolved, that he will want to change the production lines. Farming depends on the evolving of new ideas and this leads to production of a certain amount of new capital. I farm more than 200 acres—indeed, three times as much, although, perhaps on the hillsides of Scotland, it is not quite so worth while as on the rich lands of Ulster. I assure the hon. and learned Gentleman that if I were asked to find £8,000 in liquid capital today I could not do so. Certainly, if I wrote a cheque for it, the bank would not honour it, particularly with a credit squeeze on.
The result of a son having to find an amount of this kind could be twofold. Either he could sell off part of the farm or, more likely, instead of continuing to


farm high, which would be to the benefit of the country but which would tend to take more capital, he could cut back production and reduce expenditure on fertilisers and generally start farming low. Productivity would fall. That could be the disastrous result of this tax when succession takes place.
I believe that the hon. and learned Gentleman is anxious to appreciate these points. I hope earnestly that he will give most serious consideration to them. I believe that if what has been suggested did happen it would do the greatest harm not only to the agricultural industry but to the nation.

Mr. J. Bruce-Gardyne: I was surprised to discover that the hon. Member for South Ayrshire (Mr. Emrys Hughes) convinced me that there might conceivably be some justification for this Clause in some instances. He has inherited a business and Socialist clap-trap from his father-in-law. He certainly provided good reasons for charging Capital Gains Tax when he inherited that business.
I want to refer to the problem of the farmer who takes his son or anyone else into partnership. That practice has occurred quite frequently in my part of Scotland. The Financial Secretary was kind enough to assure us that if a farmer took his son into partnership with him on the farm he would not have to pay the tax on the whole value on Budget day but only on the difference in value on that part of the interest he surrendered. I presume this is regarded as a generous concession.
I have made a brief calculation. Supposing the farm was valued at £20,000 on Budget day. After 10 years, the farmer takes his son into partnership on a fifty-fifty basis. At that stage, the farm is valued at £40,000. There will have been a gain of £20,000 and the capital gain on half will be £10,000, giving a tax of £3,000.
5.30 p.m.
Where on earth is the farmer to get that money? We have heard a good deal about this already, but, presumably, there are only three ways in which he can get it. He can get it by selling a small part of the farm, parcelling out his land, in direct conflict with the whole tenor

of the Labour Party's own policy, which is to encourage farm amalgamations and not the separation of farms into small and smaller units. Alternatively, as some of my hon. Friends have said, he can raise the £3,000 needed to take his son into partnership by a bank overdraft or mortgage.
Some of us recently visited Brittany where we saw what happens in farming because of the French system of inheritance by which, if one son takes on a farm from his father, he has to compensate all his brothers and sisters for the value of their shares in the farm for which, under French law, they are entitled to claim compensation. The result is that every farmer in Brittany who starts farming operations on inheritance is saddled with an enormous debt to the bank to meet his obligations to his brothers and sisters.
In this country we have been fortunate to have inheritance laws which escape this position, but the Government say that they must immediately rectify this and land small farmers, owner-occupier farmers, with an enormous bank debt, further increased by the Government's financial activities, on death, or retirement, or when the farmer takes his son or another relative into partnership.
In the end the result will be the same, because in the end the burden of debt built up to meet these claims on the farmer will be such that he will have to sell off part of his land. Whether he sells it immediately or ultimately, it will result in further parcelling out of the land of the country, in direct conflict with the declared policy of the Labour Party. I only hope that the Government will try to bring the Clause into line with their declared agricultural policy before we have to do it for them when we return to power.

Mr. MacDermot: We have been debating the Amendment at some length and perhaps the Committee would now like me to reply to some of the questions put to me. I should like first to comment in general on the debate and to say that some hon. Members have been a little irresponsibly using very violent language about the supposed effect of this tax on the farming community. I do not know whether those remarks are


intended to strike the headlines of their local newspapers—I have no doubt that some will—but those who have characterised the tax as having a catastrophic effect on farming have subsequently made comments and asked questions showing that they failed to understand the scope of the tax and how it will apply. Some hon. Members have suggested that the result of the tax will be the complete fragmentation of our agriculture. Other hon. Members have said exactly the opposite and have declared that it will drive out the small farmers and result in great amalgamations. [HON. MEMBERS: "No."] Hon. Members should make up their minds.
The Amendments propose exemption on the transfer of agricultural land by gift or on death, and I will deal first with the issues arising in that instance. I said earlier that I could not see any grounds in principle for giving favoured treatment to agriculture compared with the rest of the community and other people carrying on other forms of trade or business, and I have not heard any arguments suggesting the contrary. What we have had has been a particular plea on behalf of particular interests and particular types of case.
I was given a number of hypothetical examples of the position of a widow who, the tenant farmer having died, took over the farm. The hon. Member for Bodmin (Mr. Bessell) asked me to imagine the example of a widow who did not herself carry on the farming and who was compelled to sell. I was asked whether she would have to pay tax on any profit which was made. I assume that by "profit" the hon. Gentleman meant any gain subject to charge under the tax. The answer is that she would, but I remind the hon. Gentleman of the qualifications.
If we are dealing with the widow of a small farmer—and I do know what sort of sum the hon. Gentleman had in mind, but imagining a farm worth £15,000 or £20,000—it is unlikely that the capital gains would exceed the death exemption limit of £5,000. If the gain were £6,000, no tax would be payable on the first £5,000 and, at a rate of 30 per cent., the liability on the remaining £1,000 would be £300. That is assuming that the whole of the gain was made since Budget day,

because this tax begins to operate only from Budget day.
One hon. Member said that it was irresponsible to introduce this tax at a time of a very tight credit squeeze, but I could not see the relevance of that. People will not be going to their bank managers during the time of the present credit squeeze to raise money in order to pay off Capital Gains Tax. On the kind of figures which hon. Members have been contemplating, with a death exemption limit of the first £5,000, this will not begin to operate for many years to come.
Secondly, many hon. Members opposite have suggested that one takes merely the figure paid for the farm originally and the value on death or disposal 20 or 30 years later, assuming that the gain would be the difference between the two, between the disposal figure and the acquisition figure. One hon. Member said in terms that no account was taken of capital investments and improvements. But that is not so. If hon. Members will look at paragraph 4(1,b) of Schedule 6 they will see that there is allowable expenditure for expenditure incurred in enhancing the value of the asset, being expenditure reflected in the state or nature of the asset at the time of the disposal. Further capital which has been put into the farm and improvements which have enhanced its value will be expenditure taken into account before arriving at the base, at the net amount subject to charge, and there then has to be deducted the £5,000 for the death exemption.

Captain Orr: My example of the figure of approximately £8,000 after 30 years did not take account of the capital injected and the improvements made because of the considerations which the Financial Secretary has just mentioned

Mr. MacDermot: I have not followed the hon. and gallant Gentleman's intervention.

Mr. John Hall: I know that the hon. Gentleman has been very patient, but the argument which he has been following does not take us very far. After the passage of time, there will be an increase in value which will be a capital gain even after allowing for all the other items which the Minister mentioned.

Mr. MacDermot: There may be, I am assuming that there is. We are dealing with a case where there has been an increase. I hope that hon. Members will understand and make clear to their constituents interested in this subject that the tax is not levied just by taking the purchase price and the eventual disposal price and finding the difference between those two figures. One hon. Member assumed the acquisition of a farm at £20,000 today which is disposed of in ten years' time at £40,000. This amounts to a doubling of the capital value of the farm in ten years. I should imagine that there would be some pretty intense capital development in the meantime—unless the hon. Gentleman is assuming that the value of farms will double in the next ten years. Certainly this is something which must go to counter some of the gloom which hon. Members opposite think is hanging over agriculture.

Mr. Bruce-Gardyne: On a point of order. Is it in order for the Financial Secretary to give an entirely misleading and corrupted interpretation of what I said?

The Temporary Chairman (Mr. Grant-Ferris): That is not a point of order.

Mr. MacDermot: I was asked to consider the transfer of a farm, or part of a farm, from father to son. This point was raised in one form or another by a number of hon. Members. One hon. Gentleman asked me whether the statement which I made that we would gladly look into this problem extended to the problem when it arises on the retirement of the father as well as on the death. The answer is "Yes". I suggested that precisely this problem should be considered during discussion of an Amendment on the Notice Paper covering retirement generally.
If one is assuming the position of a father who hands over to his son—the hon. and gallant Member for Down, South (Captain Orr) said that it is a common practice in his constituency—I imagine that in many cases the incentive for doing that is in order to avoid, not in any disparaging sense, liability for death duties. This is an obvious incentive for such an arrangement. We are here coming back to the general question which we discussed yesterday: is it right that

death should be an occasion of charge for Capital Gains Tax? One of the large number of arguments adduced by hon. Members dealt with another major principle which we discussed yesterday which is whether any inflationary element in a gain—the difference between the so-called real gain and the money value—should be the subject for charge to Capital Gains Tax.
These are main questions of principle which we have discussed and which we have reached decisions upon. I have stated my arguments on them, and I do not think that the Committee would wish me to repeat them. We do not see any reason on these accounts for special treatment of gains made on agricultural land compared with any other type of capita' gain.
I turn to the second Amendment, which deals with compulsory purchase. We have two considerations here. One is the compulsory purchase of an entire holding. Probably discussion about that is more relevant to a later Amendment which deals with compulsory purchase as such. Let us imagine one of two things—either that the farmer whose land is acquired acquires another farm, or goes out of farming. The hon. Member for Ludlow (Mr. More) agreed, and so did other hon. Members, that it was fair that the farmer who goes out of farming completely should pay a tax on his capital gain.

Mr. More: I did not say that.

5.45 p.m.

Mr. MacDermot: I made a note of what the hon. Gentleman said. He agreed that when a person sold up and went out of farming completely it was fair that the tax should be paid upon it. We can look at his exact words in HANSARD.

Mr. More: I said that it was unfair that he should be forced out of farming.

Mr. MacDermot: I was not seeking to attribute to the hon. Gentleman something which he did not say. He was referring to a voluntary sale at the time that he made that remark.
The point that I am making is that we do not believe that it is right that when a person realises the value of his holding, including any capital gain, as a result of compulsory purchase, there should be any


different treatment from the point of view of Capital Gains Tax. This is one of the main principles which we have discussed. If we are not continually to repeat the same arguments, we cannot discuss these matters on every Amendment. I appreciate that hon. Members bring them into their speeches by way of argument.
Some hon. Gentlemen opposite take the view that there should be a Capital Gains Tax only in the case of a voluntary realisation, and that there should not be in the case of any form of involuntary realisation. This is a broad question of principle which divides us. There is no reason for different treatment of that issue in respect of agricultural land from any other form of asset. But the farmer who acquires another farm will have the benefit under Clause 31 of not having to pay tax on the gain in respect of the first farm.
One hon. Member raised the question that one year may not be enough because of the difficulty of acquiring another farm. The farmer will have more than a year because, naturally, he does not dispose of his farm to a public authority the moment that that authority decides that it wants it. The authority has to serve notice to treat; there are negotiations; and there may be appeal procedures. It will be in the experience of hon. Members that quite a considerable period elapses as from the time of the notice to treat. All this time will be spent by the farmer in seeking to find another farm. The period of one year will run from the date of the conveyance.

Mr. Dance: I know of a recent case of compulsory purchase in connection with a new town development. The land was taken over and the owner was paid, I think, £200 an acre, which may sound quite substantial. He has not been able to find another farm because the price of alternative farms, particularly when a lot are taken over at one moment, rockets to £300 or £350 an acre. It may be quite a long time before he can find a reasonably comparable farm at a price which he can afford to pay.

Mr. MacDermot: That is a point which it would be in order for us to discuss in detail on Clause 31, which deals with that problem. I will be glad to listen to arguments which may be adduced on it.
The other type of compulsory purchase which we have been considering is of limited interest in the land which does not result in the disposal of the farm—cases of injurious affection, the acquisition of land for road building which may lead to the "scutey" piece, which we were told about in Norfolk language. I was asked whether these would be subject to tax. We must first inquire whether in such a transaction there is any capital gain. It by no means follows. If there is, a relatively small amount of money will be involved in most cases.
In the example given by the hon. Member for Derbyshire, West (Mr. Crawley) from his own experience of the transformer which was put upon his land, it is not the total compensation price which is received which will be subject to Capital Gains Tax. It is only on the extent to which, by that transaction, he has realised a capital gain that there would be anything which was subject to charge at all. If somebody does that, I see no reason why there is any injustice in his paying tax on that gain which he has realised, and realised in the form in which it is easiest of all to pay the tax, namely, payment in cash.

Sir M. Redmayne: We discussed this point the other night. Am I not right in saying that a part disposal counts as a disposal of the whole and that, therefore, even if the compensation was for a small part, there has then to be a valuation of the assets of the whole farm and the whole estate?

Mr. MacDermot: I should like to check that point instead of answering off the cuff. In this kind of case we are assuming a compulsory purchase of a small parcel of land. Whether there would then have to be an assessment to tax on any capital gain up to that moment on the whole farm, I will inquire and let the hon. Member know. There will, no doubt, be an opportunity to let the Committee know also.
I was asked by the hon. Member for Bessell—I am sorry, the hon. Member for Bodmin. Somebody suggested earlier that I was a little weary. No doubt the hon. Member's constituency will be named after him one of these days, and then I will have it correct. The hon. Member asked a specific point about amalgamation. If I understood his question


aright, he is afraid that if two farmers amalgamate and form a partnership, this would result in each of them, because they each acquire a half share in the other's land, becoming subject to tax for half the gain. I am not sure whether that was the hon. Gentleman's question; if not, I will study his words more carefully. In any event, I am advised that the point may be met under the provisions of Clause 31(4), but it is something that we will come to more properly on that Clause. In the meantime, I will gladly look into the point.
I have, I think, covered the specific points with which I was asked to deal. In so far as I have failed to argue further the general points, it is because I feel that we have already argued them very fully.

Mr. James Scott-Hopkins: We have had a comprehensive debate and by this time the Government and the Financial Secretary should be fully seized of the feelings of my right hon. and hon. Friends concerning their dissatisfaction with the answers which we have had.
The Financial Secretary accused my hon. Friends of exaggerating in some of the things they have said. I should have thought—indeed, the hon. Member for South Ayrshire (Mr. Emrys Hughes) thinks so, too—that these matters raise grave and fundamental problems which will be of great interest and can cause great difficulty to the farming community in the years ahead. One of the things that the Financial Secretary said in refering to a point made by the hon. Member for Bodmin (Mr. Bessell) was that the immediate impact of the tax upon widows would be small. As the Committee will realise, however, we legislate not simply for what is happening today but have to take into account the general effect of any new tax imposition. This can be of quite considerable importance. Indeed, I am sure that it will be.
I do not want to run round all the arguments which have been put forward extremely competently by my hon. Friends. The Committee will be fully seized of the reasons why we consider them to be so important. I despair of being able to convince the Government, particularly the Financial Secretary, of the special position that farming holds. It

is an industry which is completely controlled by the Government. It is extremely difficult for the farmer to accumulate capital and yet, by these capital gain provisions, although the effect may be small in the initial stages, it will be cumulative.
The Financial Secretary mentioned a figure of £5 million as the cost of the concession. I doubt the hon. and learned Gentleman's mathematics. The figure might well be higher. This is extremely damaging on an industry which has such difficulty in accumulating capital and which is so controlled by the Government at the same time. This is the basic fundamental point of trying to convince the Government why these Amendments should be accepted. The industry cannot stand this kind of imposition.
I am sure that the Committee will accept the points made by my hon. Friends concerning father and son and inheritance or handing over of property. The Financial Secretary has made a small concession by saying that he will look into the position concerning the small man and the inheritance of the small business or farm which has been built up over the years. This was the point of one of the Financial Secretary's concessions, and rightly so. How he will define a small farm, goodness only knows. That, however, is something. Having accepted the principle that there is a need, the hon. and learned Gentleman can be assured that problem goes much wider, as my hon. Friends pointed out. There was then the point of valuation concerning amalgamation. This is another issue which the Financial Secretary has, perhaps, ignored.
I must advise my hon. Friends that the reply which we have had from the Financial Secretary and the Government is unsatisfactory. The position of the industry has not been borne in mind. This tax will bear harshly upon it in the years ahead. It is not a fair tax. It is not dealing correctly and properly with the industry. A strong and powerful case has been made by my right hon. and hon. Friends about why exceptions should be made for the agriculture industry. The Government, as well as we on this side, want the industry to continue to flourish and prosper. The imposition of this tax


will make certain or will help to see that it does not, if the hon. and learned Gentleman and his right hon. and hon. Friends continue in Government. That it why I must advise my hon. Friends to support

the Amendment, if necessary, to a Division.
Question put, That those words be there inserted:—
The Committee divided: Ayes 192, Noes 201.

Division No. 149.]
AYES
[5.58 p.m.


Agnew, Commander Sir Peter
Goodhew, Victor
Murton, Oscar


Alison, Michael (Barkston Ash)
Grant, Anthony
Neave, Airey


Allan, Robert (Paddington, S.)
Gresham Cooke, R.
Noble, Rt. Hn. Michael


Amery, Rt. Hn. Julian
Griffiths, Peter (Smethwick)
Nugent, Rt. Hn. Sir Richard


Anstruther-Gray, Rt. Hn. Sir W.
Grimond, Rt. Hn. J.
Onslow, Cranley


Astor, John
Gurden, Harold
Orr-Ewing, sir Ian


Atkins, Humphrey
Hall, John (Wycombe)
Osborn, John (Hallam)


Barber, Rt. Hn. Anthony
Hamilton, Marquess of (Fermanagh)
Page, R. Graham (Crosby)


Batsford, Brian
Hamilton, M. (Salisbury)
Pearson, Sir Frank (Clitheroe)


Beamish Col. Sir Tufton
Harris, Frederic (Croydon, N.W.)
Peyton, John


Bennett, Sir Frederic (Torquay)
Harris, Reader (Heston)
Pickthorn, Rt. Hn. Sir Kenneth


Berkeley, Humphry
Harrison, Brian (Maldon)
Pounder, Rafton


Berry, Hn. Anthony
Harrison, Col. Sir Harwood (Eye)
Powell, Rt. Hn. J. Enoch


Bessell, Peter
Harvey, Sir Arthur Vere (Macclesf'd)
Price, David (Eastleigh)


Biffen, John
Hawkins, Paul
Prior, J. M. L.


Biggs-Davison, John
Hay, John
Pym, Francis


Birch, Rt. Hn. Nigel
Heald, Rt. Hn. Sir Lionel
Ramsden, Rt. Hn. James


Black, Sir Cyril
Heath, Rt. Hn. Edward
Rawlinson, Rt. Hn. Sir Peter


Blaker, Peter
Hendry, Forbes
Redmayne, Rt. Hn. Sir Martin


Bossom, Hn. Clive
Hiley, Joseph
Renton, Rt. Hn. Sir David


Box, Donald
Hill, J. E. B. (S. Norfolk)
Ridley, Hn. Nicholas


Boyd-Carpenter, Rt. Hn. J.
Hirst, Geoffrey
Ridsda[...]e, Julian


Boyle, Rt. Hn. Sir Edward
Hobson, Rt. Hn. Sir John
Roberts, Sir Peter (Heeley)


Brinton, Sir Tatton
Hopkins, Alan
Robson Brown, Sir William


Bromley-DavenportLt.-Col.SirWalter
Hordern, Peter
Russell, Sir Ronald


Brooke, Rt. Hn. Henry
Hornby Richard
Sandys, Rt. Hn. D.


Brown, Sir Edward (Bath)
Hornsby-Smith, Rt. Hn. Dame P.
Scott-Hopkins, James


Bruce-Gardyne, J.
Howe, Geoffrey (Bebington)
Sharples, Richard


Buck, Antony
Hunt, John (Bromley)
Shepherd, William


Burden, F. A.
Hutchison, Michael Clark
Sinclair, Sir George


Carlisle, Mark
Iremonger, T. L.
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Cary, Sir Robert
Irvine, Bryant Godman (Rye)
Smyth, Rt. Hn. Brig. Sir John


Chataway, Christopher
Jenkln, Patrick (Woodford)
Spearman, Sir Alexander


Chichester-Clark, R.
Johnson Smith G. (East Grinstead)
Stodart, Anthony


Clark, William (Nottingham, S.)
Jopling, Michael
Stoddart-Scott, Col. Sir Malcolm


Cooke, Robert
Joseph, Rt. Hn. Sir Keith
Studholme, Sir Henry


Cooper, A. E.
Kimball, Marcus
Summers, Sir Spencer


Cooper-Key, Sir Neill
King, Evelyn (Dorset, S.)
Talbot, John E.


Corfield, F. V.
Kitson, Timothy
Taylor, Edward M. (G'gow,Cathcart)


Costain, A. P.
Lancaster, Col. C. G.
Thompson, Sir Richard (Croydon,S.)


Craddock, Sir Beresford (Spelthorne)
Langford-Holt, Sir John
Thomeycroft, Rt. Hn. Peter


Crawley, Aidan
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfie[...]d)
Thorpe, Jeremy


Curran, Charles
Lloyd, Ian (P'tsm'th, Langstone)
Tiley, Arthur (Bradford, W.)


Dalkeith, Earl of
Lloyd, Rt. Hn. Selwyn (Wirral)
Tilney, John (Wavertree)


Dance, James
Longbottom, Charles
Turton, Rt. Hn. R. H.


Davies, Dr. Wyndham (Perry Barr)
Longden, Gilbert
Vickers, Dame Joan


d'Avigdor-Goldsmid, Sir Henry
Lubbock, Eric
Walder, David (High Peak)


Dean, Paul
McAdden, Sir Stephen
Walker, Peter (Worcester)


Dodds-Parker, Douglas
McLaren, Martin
Walker-Smith, Rt. Hn. Sir Derek


Doughty, Charles
Macleod, Rt. Hn. Iain
Walters, Dennis


Elliot, Capt. Walter (Carshalto[...]n)
McMaster, Stanley
Ward, Dame Irene


Elliott, R. W.(N'c'tle.upon-Tyne,N.)
Marples, Rt. Hn. Ernest
Weatherill, Bernard


Errington, Sir Eric
Marten, Neil
Webster, David


Eyre, Reginald
Maude, Angus
Whitelaw, William


Fell, Anthony
Maudling, Rt. Hn. Reginald
Williams, Sir Rolf Dudley (Exeter)


Fisher, Nigel
Maxwell-Hyslop, R. J.
Wilson, Geoffrey (Truro)


Fletcher-Cooke, Charles (Darwen)
Maydon, Lt.-Cmdr. S. L. C.
Wise, A. R.


Foster, Sir John
Meyer, Sir Anthony
Wolrige-Gordon, Patrick


Fraser,Rt.Hn.Hugh(St'fford &amp; Stone)
Mills, Peter (Torrington)
Woodnutt, Mark


Fraser, Ian (Plymouth, Sutton)
Mills, Stratton (Belfast, N.)
Wylie, N. R.


Gammans, Lady
Miscampbell, Norman
Yates, William (The Wrekin)


Giles, Rear-Admiral Morgan
Monro, Hector
Younger, Hn. George


Gilmour, Sir John (East Fife)
Morrison, Charles (Devizes)



Glover, Sir Douglas
Mott-Radclyffe, Sir Charles
TELLERS FOR THE AYES:


Glyn, Sir Richard
Munro-Lucas-Tooth, Sir Hugh
Mr. MacArthur and Mr. More.




NOES


Abse, Leo
Armstrong, Ernest
Barnett, Joel


Albu, Austen
Atkinson, Norman
Bence, Cyril


Allaun, Frank (Salford, E.).
Bacon, Miss Alice
Benn, Rt. Hn. Anthony Wedgwood


Allen, Scholefield (Crewe)
Bagier, Gordon A. T.
Binns, John




Bishop, E. S.
Howarth, Robert L. (Bolton, E.)
Oswald, Thomas


Blackburn, F.
Howell, Denis (Small Heath)
Owen, Will


Blenkineop, Arthur
Hoy, James
Padley, Walter


Bottomley, Rt. Hn. Arthur
Hughes, Cledwyn (Anglesey)
Page, Derek (King's Lynn)


Bowden, Rt. Hn. H. W. (Leics,S.W.)
Hughes, Emrys (S. Ayrshire)
Palmer, Arthur


Bray, Dr. Jeremy
Hunter, Adam (Dunfermline)
Pargiter, G. A.


Broughton, Dr. A. D. D.
Hunter, A. E. (Feltham)
Park, Trevor (Derbyshire, S.E.)


Brown, Hugh D. (Glasgow, Provan)
Hynd, H. (Accrington)
Parker, John


Buchanan, Richard
Hynd, John (Attercliffe)
Parkin, B. T.


Butler, Mrs. Joyce (Wood Green)
Irving, Sydney (Dartford)
Pavitt, Laurence


Callaghan, Rt. Hn. James
Jackson, Colin
Peart, Rt. Hn. Fred


Carmichael, Neil
Janner, Sir Barnett
Pentland, Norman


Carter-Jonea, Lewis
Jay, Rt. Hn. Douglas
Popplewell, Ernest


Chapman, Donald
Jeger, Ceorge (Goole)
Prentice, R. E.


Coleman, Donald
Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Probert, Arthur


Conlan, Bernard
Jenkins, Hugh (Putney)
Redhead, Edward


Corbet, Mrs. Freda
Jenkins, Rt. Hn. Roy (Stechford)
Rees, Merlyn


Cousins, Rt. Hn. Frank
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Reynolds, G. W.


Crawshaw, Richard
Jones, J. Idwal (Wrexham)
Roberts, Albert (Normanton)


Crosland, Rt. Hn. Anthony
Jones, T. W. (Merioneth)
Roberts, Goronwy (Caernarvon)


Crossman, Rt. Hn. R. H. S.
Kelley, Richard
Robinson, Rt. Hn. K.(St. Pancras,N.)


Dalyell, Tam
Kenyon, Clifford
Rodgers, William (Stockton)


Darling, George
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Ross, Rt. Hn. William


Davies, Harold (Leek)
Kerr, Dr. David (W'worth, Central)
Sheldon, Robert


Davies, Ifor (Gower)
Ledger, Ron
Shinwell, Rt. Hn. E.


Dell, Edmund
Lever, Harold (Cheetham)
Shore, Peter (Stepney)


Dempsey, James
Lever, L. M. (Ardwick)
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)


Diamond, John
Lewis, Arthur (West Ham, N.)
Short, Mrs. Renée (W'hampton,N.E.)


Dodds, Norman
Lewis, Ron (Carlisle)
Silkin, John (Deptford)


Donnelly, Desmond
Lipton, Marcus
Silkin, S. C. (Camberwell, Dulwich)


Driberg, Tom
Lomas, Kenneth
Silverman, Julius (Aston)


Duffy, Dr. A. E. P.
Loughlin, Charles
Skeffington, Arthur


Dunn, James A.
Mabon, Dr. J. Dickson
Slater, Mrs. Harriet (Stoke, N.)


Edwards, Robert (Bilston)
McBride, Neil
Slater, Joseph (Sedgefield)


English, Michael
McCann, J.
Small, William


Ensor, David
MacColl, James
Smith, Ellis (Stoke, S.)


Evans, Albert (Islington, S.W.)
MacDermot, Niall
Snow, Julian


Evans, Ioan (Birmingham, Yardley)
McGuire, Michael
Soskice, Rt. Hn. Sir Frank


Fletcher, Sir Eric (Islington, E.)
McKay, Mrs. Margaret
Strauss, Rt. Hn. G. R. (Vauxhall)


Fletcher, Ted (Darlington)
Mackenzie, Gregor (Ruthergi[...]en)
Summerskill, Hn. Dr. Shirley


Fletcher, Raymond (Ilkeston)
Mackie, John (Enfield, E.)
Swain, Thomas


Floud, Bernard
McLeavy, Frank
Taverne, Dick


Foot, Sir Dingle (Ipswich)
MacMillan, Malcolm
Tinn, James


Foot, Michael (Ebbw Vale)
MacPherson, Malcolm
Urwin, T. W.


Ford, Ben
Mahon, Peter (Preston, S.)
Varley, Eric G.


Freeson, Reginald
Mallalieu,J.P.W.(Huddersfield,E.)
Wainwright, Edwin


Garrett, W. E.
Mapp, Charles
Walden, Brian (All Saints)


Garrow, A.
Mason, Roy
Wallace, George


George, Lady Megan Lloyd
Mayhew, Christopher
Weltzman, David


Ginsburg, David
Mellish, Robert
White, Mrs. Eirene


Gourlay, Harry
Mendelson, J. J.
Whitlock, William


Greenwood, Rt. Hn. Anthony
Mikardo, Ian
Williams, Alan (Swansea, W.)


Gregory, Arnold
Millan, Bruce
Williams, Mrs. Shirley (Hitchin)


Grey, Charles
Miller, Dr. M. S.
Williams, W. T. (Warrington)


Griffiths, Will (M'chester, Exchange)
Milne, Edward (Blyth)
Willis, George (Edinburgh, E.)


Gunter, Rt. Hn. R. J.
Molloy, William
Winterbottom, R. E.


Hamilton, William (West Fife)
Morris, Alfred (Wythenshawe)
Woodburn, Rt. Hn. A.


Hannan, William
Morris, Charles (Openshaw)
Woof, Robert


Hart, Mrs. Judith
Newens, Stan
Wyatt, Woodrow


Hazell, Bert
Noel-Baker,Rt.Hn.Philip(Derby,S.)
Yates, Victor (Ladywood)


Heffer, Eric S.
Oakes, Gordon
Zilliacus, K.


Henderson, Rt. Hn. Arthur
O'Malley, Brian



Holman, Percy
Oram, Albert E. (E. Ham, S.)
TELLERS FOR THE NOES:


Houghton, Rt. Hn. Douglas
Orme, Stanley
Mr. Lawson and Mr. Harper.

Mr. Bessell: I beg to move Amendment No. 118, in page 28, line 28, to leave out "not".

The Temporary Chairman: I think that it will be convenient to discuss also Amendment No. 119, in page 28, line 31, leave out "not".

Mr. Bessell: The purpose of the Amendment is to ensure that profits obtained as a result of gambling are included in any tax which is in the form of Capital Gains Tax. It is very important

that this matter should receive the careful attention of the Committee.
I am not one of those who believe that a Capital Gains Tax is a bad thing in principle. On the contrary, I believe that it has great merit. For example, I think it right that a tax should be levied which ensures that those who do the least work, but who have the sharpest wits, pay the highest price, while those who do the most work are taxed the least amount. As has already been said during our debates, the United States of


America has a lower level of taxation, both in relation to Income Tax and to Capital Gains Tax. It is probably true to say that the reason for the lower rate of Income Tax in the United States is the existence of the Capital Gains Tax, which has enabled the Treasury there to reduce the level of Income Tax.
Therefore, if we are to have a Capital Gains Tax it follows that the exceptions from that tax must include only those cases where real hardship is caused. That is the motive behind a number of Amendments that have been put down to this part of the Bill, dealing with the tax. These Amendments seek to eliminate hardship wherever it is shown to exist. If the principle is accepted that the only exceptions should be those where real hardship is caused it must also follow that there must be no exception in respect of which there is a speculation resulting in a very considerable financial gain to the speculator.
In those circumstances, it is incredible that there should be no provision to levy Capital Gains Tax on the proceeds of betting. It is even more incredible that the Bill should be drafted in such a way as to provide a specific exemption from the tax in the case of betting. This must be troubling the minds of many hon. and right hon. Gentlemen opposite, not only because it is illogical but because it presents a completely new principle.
If I were fortunate enough to possess a Renoir, a Steinway piano, or a large block of Government bonds, and I happended to sell them and make a profit on them some years from now, I would have to pay tax on the transaction. I may have acquired them as a result of careful saving over many years. If, on the other hand, I were fortunate enough to win £93,000 on an investment of 1s. 9d.—which happened this week to a very fortunate lady—I would go off scot-free and would be able to spend my winnings as I liked, with no obligations to the Chancellor. The logic of this is incredible.
I ask the right hon. and learned Gentleman to consider one aspect of the case very carefully. It is true that over the years it has been difficult for any responsible body to assess the amount of money spent annually on gambling, and even

more difficult to arrive at any figure in respect of the total amount of winnings from gambling of all forms. The only evidence which I will call this afternoon is that which is to be found in an article in the New Statesman of 3rd April, 1964, under the heading "Britain a Nation of Gamblers" and which contains many quotations from the investigation carried out by the Churches' Council on Gambling.
It admits that it is difficult to arrive at an accurate assessment of the figure involved, but states that certainly no less than £1,000 million was spent on gambling during 1963. The amount which accrued to the speculators is even more difficult to assess, but a number of figures have been suggested, the lowest of which is £300 million. It may be that the real figure is closer to £450 million.
It is worth noting that if the Capital Gains Tax had been levied on this sum in 1963 the amount which would have accrued to the Exchequer would have been between £75 million and £150 million.

Mr. William Shepherd: How can the hon. Gentleman make any sense of these ludicrous figures? Before these figures make any sense we must know how many sums were staked over and over again, and what the net wins and losses were. Otherwise, the figures are useless.

Mr. Bessell: I have said that this is a difficult figure to assess, and that the only source which can be regarded as having any authority is the investigation which was carried out by the Churches' Council on Gambling. It is worth noting that its assessment has been accepted as reliable by a number of responsible bodies and individuals, and it forms the basis of the authoritative article which appeared in the New Statesman.

Mr. Barnett: Does not the hon. Member agree that if there are net winnings in the hands of punters there must be net losses in the hands of bookmakers?

Mr. Bessell: That is so, but the amount invested in gambling was not less than £1,000 million. It has been suggested—although I have not quoted this figure before—that a more accurate assessment would be £1,300 million in


the year in question. It has been estimated, from such information as it is possible to glean from all sources, that the result of that investment has been a return to the gamblers of £300 million—not necessarily a net profit, but, nevertheless, a return upon the money invested.

Mr. Barnett: Mr. Barnett indicated dissent.

6.15 p.m.

Mr. Bessell: The hon. Member shakes his head, but week after week and month after month we read in our newspapers of very substantial winnings on the football pools. Take only the case of football winnings. Let us not beg the question; there is no doubt what kind of profit it is. If I invest 1s. 9d. and it returns £93,000 it is a substantial and handsome capital gain, but I am not called upon to make any kind of contribution to the Exchequer from that amount—

Mr. Eric Lubbock: What was worrying the hon. Member for Heywood and Royton (Mr. Barnett) was the fact that my hon. Friend was not talking about the net figure. Will he make it clear that the Amendment does not suggest that there should be any offset for losses? We are talking about the gross figure, not the net winnings.

Mr. Bessell: What we are talking about is the amount of winnings. We are not concerned about offsetting any losses. I see no reason why we should be. We are talking about gambling. It is a capital gain in the sense that the money which has been spent has produced a very high return. To that extent it should be—

Mr. Shepherd: rose—

Mr. Bessel: I shall return to the hon. Member in a moment.
It is reasonable that this should be made subject to tax. If it is not, many people will be very surprised. This afternoon, we have not been privileged to see many Members on the benches opposite, but I find it difficult to believe that at least some of them will not find difficult to reconcile with their consciences a Bill which specifically excludes from its many provisions any tax upon gambling.

Mr. Shepherd: The hon. Gentleman has repeatedly said that there is no tax on gambling. If he has put down 1s. 9d.

and wins £75,000 he has paid one-third of the win in tax before he receives it.

Mr. Bessell: The hon. Gentleman does not follow my argument. It may be my fault. It is possible that I am not putting my case clearly. I am talking about a tax on winnings resulting from gambling. That is a very different matter from a tax on betting as we have it now.
I promised the Financial Secretary that I would be brief, and I will keep my word. Throughout the whole of this debate we have had many references to Alice in Wonderland. As I read the Bill I am not entirely surprised that the works of Lewis Carroll should spring to the minds of many hon. and right hon. Members in relation to gambling and winnings from gambling and a Capital Gains Tax. If the Chancellor expects that as a result of the introduction of this form of Capital Gains Tax he will be greeted by the country in the words used about the slaying of the Jabberwock,
Come to my arms, my beamish boy",
he will be very much mistaken.
If the right hon. Gentleman is not proposing to attack, but, indeed, to penalise, the speculator who gambles in any way whatsoever, the whole tax becomes nonsense. Moreover, I would say that if the croquet mallet which he is using to attack the speculators is in a form which permits him to exclude gambling he will find, like another character in "Alice in Wonderland", that the croquet mallet has turned into a flamingo.

The Solicitor-General (Sir Dingle Foot): I can answer this Amendment in a very few words. The argument addressed to the Committee by the hon. Member for Bodmin (Mr. Bessell) was in support of the proposition that in some way or other the large sums hazarded each year in betting and gaming should be the subject of a tax.
That is an argument with which I have a certain amount of sympathy, but the proposal we have to consider on this Amendment is whether betting and gaming winnings should be treated as capital gains. It may well be that the taxing of betting is a subject which will need further study in the future. It has often engaged the attention of Chancellors. Ever since I can remember there have been discussions about ways in which it


might be possible to extract a considerable revenue from winnings made from lotteries, or betting on racing, or whatever it may be.
I have to submit to the Committee that this form of personal revenue is not in any way an apt subject for a Capital Gains Tax. Indeed, that was the proposition put forward on Second Reading by my hon. and learned Friend the Financial Secretary. The essential feature of a Capital Gains Tax is that the taxpayer has an asset which he first acquired and of which he afterwards disposes. That is what is always involved. There is an acquisition and the disposal of an asset, whether it consists of stocks and shares, a chattel, a parcel of land, a dwelling-house or whatever it may be; something to which it is possible to attach an original value and something to which may be attached another value to see whether there has been a gain or a loss.
A sum of money placed as a bet with a bookmaker or in a lottery does not acquire anything. The person concerned has engaged in an entirely different form of transaction. All that he has is a chance either that the horse or dog will win, or that he will draw a prize in a lottery.

Mr. Bessell: I wonder whether the learned Solicitor-General would agree that if he or I went to a bookmaker and placed a bet on a horse we should in fact, for our investment, receive a ticket and that on returning that ticket to the bookmaker, we should find that it had acquired an entirely new and very high value in the event of the horse having won? Would not that be a capital gain on our investment?

The Solicitor-General: No, because there would be no asset in the first place on which it would be possible to place any value at all. There is only one sense in which it might be said that there was a capital asset. It is the only exception to my argument. That happens when someones buys a ticket for the Irish Sweepstake or any other sweepstake. The punter acquires a ticket which he can dispose of, or he can dispose of part of it. Except in that sense there is no analogy between the sort of transaction which the hon. Member for Bodmin has been dis-

cussing and a capital gain which involves, first, the acquisition, and then the disposal of an asset.

Sir Douglas Glover: I am not disagreeing with the argument advanced by the Solicitor-General, but I think that he is wrong in one respect. If I have a ticket which I acquire on a racecourse for a particular race, and I meet the hon. Member for Bodmin (Mr. Bessell) who offers me £1 for the ticket, he is proving that it has some value

The Solicitor-General: I am not saying that the ticket has no value. I am saying that it is not an asset in the sense in which we are concerned when considering a Capital Gains Tax.
The language used by bookmakers and pool promoters is sometimes a trifle misleading. For instance, when a bet is placed there is often a reference—indeed, the hon. Member for Bodmin used the term himself a moment ago—to the placing of an investment. We hear of dividends being paid out on football pools, but I think that the Committee will agree that they are not investments or dividends in the sense in which we are now considering investments or dividends. They represent something entirely different.

Mr. Maxwell-Hyslop: Would not the hon. and learned Gentleman agree that the best analogy is an option, which may be valueless because a person may not take it up, and the ticket may not win? An option is covered by the Capital Gains Tax.

The Solicitor-General: There might be some analogy where there is a ticket such as a ticket for a sweepstake. Apart from that, I submit that there is no analogy when a bet is placed on a horse, or dog, or whatever it may be. There is not something which may be valued at the outset. We cannot put a value on the ticket and then a further value if it is a winning ticket. It is impossible to draw the sort of comparison which has to be drawn when one is seeking to impose a Capital Gains Tax.
There is a further difficulty to which the attention of the hon. Member for Bodmin was drawn during his speech. If we are to treat winnings as capital gains, what are we to do about losses?


Apparently, this caused the hon. Member for Bodmin no difficulty. He said that no allowance would be made for losses. That, I submit, would be a rather novel principle to introduce into our tax law. We cannot take account of gains, but take no account of losses.
How often would a person be taxed and over what period of time? Would it be over six months or 12 months? Would the taxpayer be allowed to make a return only on his winnings and not be allowed to set off his losses against them? The only way in which this could apply in the realm of a Capital Gains Tax would be to make the losses deductible from the other capital gains of the taxpayer. That would, I submit, produce a most inequitable result.
Suppose a man made a capital gain in the way suggested, and was a wealthy man. At the end of the year, or whatever the period might be, he could set off the whole of his betting losses against his normal capital gains. The capital gains may be made on property, stocks and shares, or anything else and the wealthy man may say, "If these gains are to be treated as capital gains for the purposes of the Capital Gains Tax I will, under the Amendment, reduce it, perhaps extinguish it altogether, because of my betting losses over the appropriate period".
6.30 p.m.
That would happen for a man with other capital gains, but a great many people who bet on lotteries and other forms of gambling do not have other capital gains. Of the many workers in this country, while some may have capital investments a great many do not. A great many of them are not even assessed for tax purposes by other than the P.A.Y.E. system. Thus, they do not have any capital gains against which their betting losses could be set. The same could be said of old-age pensioners and people living on small incomes, many of whom, obviously, bet on football pools and other things.
If the Amendment were accepted there would be another unjust result.

Mr. Lubbock: Had the Government been prepared to accept an exemption limit of £400, as we proposed earlier, the Solicitor-General would not now be worrying about old-age pensioners.

The Solicitor-General: The hon. Gentleman cannot escape the unjust result that the man who has no capital gains, and who is assessed under P.A.Y.E.—including old-age pensioners and others—would not be able to set off his gambling losses in the way that the man with capital gains would. Therefore, the comparatively wealthy punter who has capital gains could take advantage of such a system. Indeed, it would not matter much to him how much his betting losses were, up to the total of his capital gains. The P.A.Y.E. man and the pensioner would not be in that fortunate position and we would be creating not only an unjust, but a fantastic state of affairs.
It may be desirable—and I think that this is the purpose behind the Amendment—to find a way of imposing further taxation on betting and gambling, but I suggest that the Amendment is manifestly not the way by which that should or could be done. Obviously, if one is to have such taxation it must be done not on the basis of the punter, but the bookmaker and pools promoter. We have in the last few years imposed a form of taxation of this kind. We passed the Betting Duties Act, 1963, under which a pools betting duty is imposed and under which bookmakers must pay licence fees. By the Finance Act, 1964, that system was extended to fixed-odds betting. I am informed that the revenue from these sources is now about £32 million a year, so it cannot be said that this form of activity escapes taxation.
It may be that future Chancellors—perhaps my right hon. Friend, in a future Budget—will want to devise other methods of taxing betting and gambling, but, for the reasons I have given, the proposition which has been suggested is not satisfactory and I invite the Committee to reject it.

Mr. Frederic Harris: When I listened to the remarks of the hon. Member for Bodmin (Mr. Bessell) I did not think that his proposal was likely to be a Liberal winner. Nor would it be particularly popular with the public, a large number of whom like to have an occasional gamble. With the Derby coming along next week, this would not be a particularly appropriate time to introduce such a scheme.

Mr. Bessell: Is the hon. Gentleman suggesting that before proposing an Amendment to any Bill one must consider whether or not it will be popular in the country?

Mr. Harris: I am not suggesting that. I leave it to the hon. Gentleman to work it out. Perhaps the Liberals are indeed following the wind of change. I admit that it seems illogical that for a few pence a person can win £100,000 or even £200,000 and not be subject to Capital Gains Tax, yet a person can, after concientious saving over many years, realise a profit on an asset and be subject to the tax.
The bulk of gambling takes place on horse racing. [HON. MEMBERS: "No."] I am sure that it does. In any case, we must remember that, by and large, the bookmaker and not the punter profits in the end. Thus, any attempt to introduce a tax of the sort proposed—and I regret that the Solicitor-General hinted that if the Government produced another Budget they might think in terms of another sort of tax—would only add to the complexities of our tax system.
One should regard expenditure on horse racing as pleasurable. People like to spend a pound or two or a few shillings on a bet and when the losses are added up at the end of the week or month the average punter considers that he has spent money on gambling just as he might have spent it on going to the cinema or doing something else. [Interruption.] I hear hon. Members talking about bookmakers' profits. Those profits are already taxed. This is rather a vicious circle. Indeed, the more I think about this business the more I am coming to the conclusion that it is regrettable that the Government introduced Capital Gains Tax in the first place. Further complexities arise with every word that is said. I suggest that the best answer would be for the Government to scrap the tax, particularly since it seems that the Liberals wish to attract even more Capital Gains Tax than the Government. I hope, therefore, that my hon. Friends will press the Amendment.

Mr. James Ramsden: I listened with interest to the speech of the hon. Member for Bodmin (Mr.

Bessell). I regret that I could not go the full length and support all his arguments. I could not follow his suggestion that anybody who happens to buy a ticket from a bookmaker when betting on a horse, or who invests in a football pool is necessarily, by that transaction, acquiring an asset. All my personal experience is against that idea.
I never thought that I would hear a Solicitor-General—and we know that the present one is a man of undoubted gravity and wisdom—seriously having to refute the proposition that the purchase of a betting ticket or the filling in of a football coupon was an investment.

Sir D. Glover: I do not disagree with my right hon. Friend's main argument, but if I buy a ticket to bet on a horse, ante-post, running in the Derby at odds of 50 to 1 from a bookmaker and my right hon. Friend wishes to buy a half share in it, he will probably pay twice as much for his half as I paid for the whole ticket—and that before the race has taken place. Is it, therefore, not an asset until the race is over?

Mr. Ramsden: I would have thought that only a very contingent asset on that argument. I was saying I thought the hon. Gentleman's Amendment did deserve a word or two of sympathy because it does at least underline the difficult position in which the Committee has been placed by the introduction of a Capital Gains Tax, of this extremely comprehensive type and more especially by being asked to agree to exemptions of the type which are the subject matter of this Clause.
I am in complete agreement with my hon. Friend the Member for Croydon, North West (Mr. Frederic Harris). We have been told that the purpose of the tax is to promote a climate of social equity and justice and in pursuance of this aim the Committee has been brought to the position where an ordinary collector's piece, the stock in trade of the collector, is realised as a gain subject to the Capital Gains Tax. However, where the most esoteric and unusual of items in the collector's trade is concerned, the vintage motor car, it is not subject to Capital Gains Tax. The Financial Secretary made no attempt when he


replied to an earlier debate, to justify this position.
The position is even more ridiculous on betting. We were told earlier in these debates that chattels were included within the ambit of this tax because people might read in the newspapers of the enormous gains accruing to others on the realisation of chattels and this might upset the trade unions and jeopardise the success of the Government's income policy. It is my experience, and I think that it will be the experience of many hon. Members of the Committee, that when people read of these gains there is no widespread feeling of resentment that they should have occurred. They are accepted as windfalls.

The Temporary Chairman: The hon. Member must not go back to earlier Amendments, but must keep closely to the business before the Committee.

Mr. Ramsden: I do not think that this type of gain incurs widespread resentment, any more than it provokes resentment among people when they read of a very large win by people on the football pools. I think the general feeling when we have a tax as widespread and comprehensive as this is simply that it is absurd to leave out betting.
We are told that those who gain from the sale of works of art are in some way privileged people. The Financial Secretary said that privileged people are those who by their study had acquired the knowledge to engage themselves in collecting in the art market and eventually to make a profit by so doing. We now have the position where a young man, studious and well-behaved, uses his spare time to acquire knowledge of works of art and makes a collection and eventually a profit, is considered privileged to pay Capital Gains Tax. Another young man who may spend all his spare time sucking his pencil and filling in football pools coupons may make a gain as a result of this, but he will be privileged to be exempt from the tax.
We are now appearing to be rather foolish. What price the candy-floss society now? It must be extremely painful for Treasury Ministers to have to defend these kind of propositions. They betray a sense of values which I should have thought it was very difficult for in-

telligent and educated men, as they are, to accept. No wonder that before the introduction of the Bill the Treasury abdicated its former responsibilities for the arts and no wonder that, throughout the debate, we have not seen any signs of the Minister who is responsible for the arts.

6.45 p.m.

Mr. Harold Lever: The hon. Member for Croydon, North-West (Mr. Frederic Harris), who criticised the hon. Gentleman for Bodmin (Mr. Bessell) because his Amendment was not going to be a popular one, is mistaken as to the consequences of the Amendment if accepted, although they were certainly not the intention of the mover. The Liberal Party, as should be known, never courts popularity. Its main concern is to court meritorious dislike. That is its main activity, and in pursuit of it this Amendment is placed on the Order Paper. The Liberal Party and not a few others seem to suppose that the Budget is mainly concerned with correcting the moral imperfections of their fellow citizens.
They think that those who draft and drive the Finance Bill along do so in order to secure a significant moral betterment in the population. They believe that such vices as the population is prone to will be curbed while such virtues as may be obtained from it will be encouraged. This is not primarily the motive of the Finance Bill. The Finance Bill's main concern, although one would hardly believe it if one listened to the debates in this Committee, is not to correct the tyrant's stroke of fate and the cruelties of life—

The Temporary Chairman: Order. I think the time has come when the hon. Member ought to address himself to the Amendment.

Mr. Lever: If this Amendment were accepted, contrary to the supposition of those who moved it, far from there being a net gain on tax there would be an enormous loss to the revenue. I commend the Government for putting in this Clause because, although it appears to be a gift to the gambler, it is in fact a protector of the revenue. Without this Clause net losses on gambling would be set off against the capital gains incurred which would be liable to tax.
The provisions of the Bill differ somewhat from the arithmetic of the hon. Member for Bodmin. As I understand it, he said that £1,300 million is staked, £300 million is given back and this represents £300 million of winnings to be taxed. It is extraordinary arithmetic which, fortunately, is not adopted by the system of capital gains in this Bill.

Mr. Bessell: I made it clear that we are quite ruthless about this. We do not propose that we should offset losses against winnings. In other words, it is the winnings we are concerned with. We are concerned that the Treasury and the nation shall have some benefit from them.

Mr. Lever: The ruthlessness is not given effect to in the framing of the Amendment—

Mr. Lubbock: That does not matter. It is a triviality.

Mr. Lever: The triviality is of such dimensions that, were the Government to yield here and accept this Amendment in any conceivable form that I can think of, the net loss to the revenue would be immense.
In the circumstances, I think that the Liberal Party merely makes itself ridiculous in attempting to bring into the argument something that is not relevant to capital gains. Any form of drafting that attempted to tax gambling winnings within the framework of the Capital Gains Tax would inevitably mean a loss to the Revenue, and not a gain. Rejection of the Amendment has a serious consequence, because it can be used as a stick with which to beat the Government, and as a means whereby the Liberal Party can contrast the tax on business gains, and so on, with the Government's supposed inability to tax gambling winnings.
The short answer to the Amendment is that it is a lot of bunkum. Gambling winnings may be susceptible to tax, but they are not susceptible to the Capital Gains Tax, because a net loss to the Revenue will be produced. The Government are entirely right in keeping it to the words used in the Bill, and the Amount must be rejected with contempt.

Mr. Lubbock: The hon. Member for Manchester, Cheetham (Mr. Harold Lever) chooses to make party political

points about a perfectly serious Amendment. I take issue with him in this quarrelling so much with the drafting, because what is intended is quite clear, and my hon. Friend the Member for Bodmin (Mr. Bessell) explained it in his excellent speech. My hon. Friend made it quite clear in reply to an intervention from an hon. Member opposite—who has since left the Chamber—that it was not proposed to offset losses against winnings. That has had to be repeated several times, until I think that it must be penetrated even the skull of the hon. Member for Cheetham—

Mr. Harold Lever: I know that I am particularly stupid, unlike the hon. Member for Orpington (Mr. Lubbock), but I dealt with that point when I said that no conceivable form of drafting could give effect, within this Bill, to the purpose in the Amendment.

Mr. Lubbock: Of course there is. The hon. Member is talking absolute nonsense. It would be quite possible for the Government, if they were to accept the Amendment, to say that losses were not to be offset against winnings—

Mr. John Hall: The hon. Member for Orpington (Mr. Lubbock) will know that the Government do precisely that in subsection (2) of Clause 37. They charge a person resident in this county on his gains, without taking losses into account.

Mr. Lubbock: I thank the hon. Gentleman for his intervention. Perhaps I should have looked at that Clause, when we might have incorporated the same words in our Amendment. Were the Government prepared to accept the spirit of the Amendment, that is what they could do.
I was disappointed by the Solicitor-General's reply, because I have heard Chancellors of the Exchequer say on previous occasions that this is something that requires further study. We have this vast amount of money being staked in gambling—as much as £1,300 million, according to the report of the Council of Churches—yet no attempt made by the Government to get any benefit from that for the nation as a whole, and for other taxpayers who suffer from the very severe impositions in the Finance Bill.
I must make it absolutely clear, since the hon. and learned Solicitor-General


also misunderstood, that we are talking of the winnings and not of the sums hazarded. We are thinking of the person getting a very large gain from, perhaps, a very small stake, and we believe that the very large gain should be taxed. I am not against gambling as such, although I bet only on certainties. If anyone doubts that statement, let him ask Ladbroke's, because I have never lost a bet with Ladbroke's—[HON. MEMBERS: "You have never had one."] In fact, I have had two—both an Roxburgh, Selkirk and Peebles.
I believe in a taxation system based on ability to pay—a fundamental principle that has been lost sight of in this debate. If someone wins £300,000 on a football pool, does the Solicitor-General say that the whole of that sum should go scot-free? Is it not more sensible that the taxation system should take account of it and relieve the winner of some of his gain? I am not concerned with legalistic arguments about whether or not any asset is involved, but I think that the hon. and learned Gentleman ignored options on stocks and shares which are taxable under this Bill. That seems to be very much the same thing. The person does not have an asset until he decides to take up the option, and this would be precisely the same as the ticket to which my hon. Friend referred.
A tax of 30 per cent. on winnings of £300,000 on the football pools would be quite reasonable. The winner would pay £90,000 in tax, and have £210,000 left. No one could suggest that he would find that any hardship. On the other hand, some people will find it almost impossible to get together the money necessary to satisfy Capital Gains Tax provisions. Yesterday, we were talking about the position of trustees of family companies, where very great hardship will undoubtedly result. Such an argument, however, cannot be applied to the person winning £300,000 on a football pool.
What the Government propose to do all the way through this Finance Bill is to penalise enterprise and initiative, but by rejecting this Amendment they are encouraging the gambler. Practically the only people who will in future he able to accumulate money will be those who win very large sums on the football pools.

Sir Charles Mott-Radclyffe: I find this a very entertaining discussion. The Solicitor-General was, no doubt, quite right in saying that on technical grounds it would be very difficult to apply this particular form of tax to the particular form of gambling which the Liberal Party has in mind. Nevertheless, the Amendment has hit the Government at the weakest point in the whole of their philosophy.
Time and time again during these discussions on Capital Gains Tax we have asked for various exemptions—works of art, agricultural land, and so on—and each time we have been told that the whole philosophy is that the tax must apply as universally as possible in order to make it as fair as possible. If, for one's retirement, one cashes in hard-earned savings—Capital Gains Tax applies. If one improves property, and realises it—Capital Gains Tax applies. There are even a number of cases in which the tax applies to assets that have not yet been disposed of. This is what is called the notional disposal and notional gain, though nobody knows how to work out that gain.
The night before last, the Financial Secretary gave a remarkable answer to a question about the amount of revenue he expected from Capital Gains Tax on works of art. He replied that he did not know and that this was not the point. It had to apply to works of art because, if it did not, there would be all sorts of disreputable gambling in works of art. It is quite clear now that as a result of this strange philosophy of the Government there will be a completely new form of gambling on a vastly increased scale, because that is the one way in which anyone will be able to hold on to any gains.
It will not just be gambling on horses or the Stock Exchange—something quite new will creep in. People will no longer gamble on the Stock Exchange—they will ask a bookmaker for odds on the movement of share prices in the next fortnight or three weeks. There are all sorts of extremely interesting contingencies on which one can bet with a bookmaker. I say it with hindsight—I never thought of it at the time—but I only wish that a fortnight or three weeks ago I had asked a bookmaker for odds on the


Chancellor of the Exchequer and Mr. Kaldor between them achieving this morning something which Hitler never succeeded in achieving—closing down gilt-edged dealings on the Stock Exchange.

7.0 p.m.

Mr. Shepherd: This debate has not only been entertaining; it has been revealing. There was a statement by the hon. Member for Manchester, Cheetham (Mr. Harold Lever) that there was no moral purpose behind this Finance Bill at all. I find that a rather refreshing and frank comment.

Mr. Harold Lever: I did not say anything of the kind.

Mr. Shepherd: I invite the hon. Member to read HANSARD tomorrow morning. He will see his words displayed there very clearly indeed.
I do not think the Liberal Party is holding a winning ticket in this matter. They have a purpose although I do not share the party's puritanical views, in that many of these gains could not be taxed. It is very bad indeed to put a tax into operation when it cannot be uniformly collected. Can we imagine people who have been sitting at murky little "chemmy" tables in London saying, "I have won £10,000 on 'chemmy' let me have a Capital Gains Tax certificate at once"? We know that this would not happen and that this proposal is impracticable.

Mr. Bessell: Surely the hon. Member recognises that if people defraud the Revenue by refusing to declare their income on their returns they are breaking the law? The same could apply if people sold something which they had possessed and did not return that gain. One has to assume that the law would be enforced.

Mr. Shepherd: The possession of a physical asset which is sold and from which a capital gain is derived is a very different proposition from that of winning money at a "chemmy" table and not declaring the profit.
I take the view that we should get more revenue out of gambling. The proper way to do it is to put very heavy annual licence duties on the items which are con-

nected with gambling. I have suggested £5,000 annually on possession of a "chemmy" table, £1,000 on every betting shop and £500 on every one-armed bandit. That would have the effect of gaining revenue for the community and shutting down the excessive sources of gambling which are available. I do not want to see roulette tables in every mining town in the country, but if every roulette table had a tax put on it that would bring in more money.
It would be optimistic to think that we collect all the money which could be collected from betting shops. The practical way is to tax the items used in these newer forms of gambling and to get revenue for the country in consequence. I hope that the Solicitor-General will convey these sentiments to the Chancellor, but I take the view that the suggestion made in the Amendment is wholly impracticable.

Sir D. Glover: The Committee should thank the Liberal Party for bringing this Amendment forward. I do not think it is practicable and I do not think it has been brought forward for that purpose. I think this was done for the purpose of Liberal hon. Members being able to say that they were the one party who put down an Amendment to net casual winnings on football pools and gambling. Make no mistake, if this Bill becomes law every person who has to pay for a capital gain will say to his Member of Parliament, "It is absolutely scandalous." A constituent may say, "Here am I paying on £3,000, yet only yesterday I read in the newspaper of someone who had gained £90,000 in a football pool."
The Government are in a dilemma. They were returned to power to produce a dynamic society and they have spent the last two years talking about a "candy floss society", yet the net result is that effort, energy and thrift are to be hit while the speculator and the gambler goes free. As my hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe) said, I do not think we could incorporate these gains in the capital gains provisions of the Bill. I viewed with some alarm the suggestions of the hon. Member for Manchester, Cheetham (Mr. Harold Lever), because I do not like putting imposts on people for the sake of putting imposts on them. I believe in using


imposts to raise revenue which the State needs for a given purpose.
I am not a killjoy. Nor do I think that we should do these things because that would be popular with someone else. The fact remains that in football pools, sweepstakes on the Derby and so on, people make these gains and they are not looked upon by the rest of the nation with great favour. There is no great animosity shown towards them, but when others are hit by this Bill it will be said:
There is something rotten in the State of Denmark
and that the Government have got their priorities wrong. The Solicitor-General should report to his colleagues that the theme of the debate on this Amendment is that there is something wrong when the purpose of the tax is to levy an increasing burden on energy, thrift and effort and yet to allow these massive gains to go through without let or hindrance.
Perhaps because of his nonconformist background, I think that the SolicitorGeneral—I also thought that this had something to do with the Liberal Amendment—said that there was no asset when one made a bet on a horse or on a dog. There is an enormous asset when one bets on a horse. If, in January, one draws a ticket for a horse in the Derby, and the price is 50 to 1 and £10 is paid for it, one stands to win £500. Subsequently, that horse runs in some races and, although the price comes down, it may start favourite at 5 to 1. The ticket could be sold on the market next day for £250. Of course it has a value, and it keeps that value until the first horse passes the winning post.

Mr. Kitson: Probably there is a better example. If a man buys a tote treble ticket and his horse wins the first race at 33 to 1, and then he is lucky on the second leg of the treble at the same sort of odds, he may be in a position of bein able to pick up the whole pool. Then he can go to the tote window and see that his ticket is worth £1,000. If the pool was worth £2,000, and he has one of the remaining two tickets, before the last race, it is wrong to say that the ticket, in those circumstances, has no value.

Sir D. Glover: I am grateful to my hon. Friend for his interruption, for he has far more experience than I have. I am glad that he gave a very good example. The Solicitor-General should not go away with the idea that these tickets could not be considered as asset. To use that argument is complete nonsense, because when one buys a ticket one certainly has an asset until the race has been completed.
Amendment negatived.

Mr. John Hall: I beg to move Amendment No. 233, in page 28, line 35, at the end to insert:
(7) It is hereby declared that a gain shall not be a chargeable gain if it accrues in consequence of an acquisition by compulsory powers (or by sale by agreement to an authority possessing such powers).

The Deputy-Chairman (Sir Samuel Storey): With this Amendment we can also discuss Amendment No. 353, in page 28, line 35, at end insert:
(7) It is hereby declared that a gain shall not be a chargeable gain if it accrues in consequence of the acquisition by compulsory powers (or by sale by agreement to an authority possessing such powers) of an interest in land or buildings.

Mr. Hall: This Amendment seeks to protect persons who are forced into the position of securing what is a theoretical capital gain against their will. It affects many people. It affects farmers, householders, people with investment in property, businessmen and a whole range of citizens.
In the remarks I intend to make in support of the Amendment I shall confine myself to the effect, on the whole, on property owners of one kind or another. I shall not attempt to cover the effect on agricultural land. I am certain that that will be taken up by those of my hon. Friends who have a more specialised knowledge of the effect on agriculturists as a whole.
I gather that the Minister without Portfolio is to reply to the debate. I had hoped at one stage that it might be the Financial Secretary, but I can quite understand that he has been carrying a heavy burden over the last few days. He has had to work very hard and must be extremely tired. Perhaps I shall get a rather more helpful answer in his absence,


because up to now the Financial Secretary's financial philosophy has not been very encouraging to my hon. Friends and I.
Only the other night there was enunciated to the Committee a new law which will go down in history as "MacDermot's law", which, perhaps, I can sum up as a slight variation on an old verse which will be familiar to many hon. Members on both sides:
Higher taxes have higher taxes upon their backs to ride 'em;
And higher taxes have higher taxes, and so on, ad infinitum".
That sums up the "MacDermot law" which was expounded to the Committee the other night.
It was followed by the Financial Secretary telling us that we were returning to the past in our search for methods of enforcing tax law. He said this in justifying the power which has been given to inspectors to invade our private homes under Schedule 9. He justified that by referring to the Finance Act, 1894. Are we to expect a return to even earlier methods of tax enforcement? If we are, perhaps I can draw attention to one or two methods which proved very efficacious in the past, if we go back far enough. I have heard that the rack was a very good method of persuading reluctant taxpayers to stretch their resources to the utmost. I am also told that the Iron Lady was used to squeeze obstinate taxpayers to death. No doubt, there are many other such methods. As we have not got the Financial Secretary answering the debate now, perhaps we shall get a more helpful reply.
All hon. Members will have had experience in their own constituencies of the effects of compulsory purchase. In many cases the procedure is formidable. Often it is very protracted, although, in passing, I may say that perhaps our procedure is preferable in that respect to that which operates in many countries where a State takes what it wants for what it regards as the benefit of the community and argues about compensation afterwards.
When the whole procedure of compulsory purchase is gone through and, as is usually the case, the application for a compulsory purchase order has succeeded, the owner finds that his property has been

taken from him. In some cases he might be willing to dispose of it. In other cases he becomes resigned to it. In other cases he might be bitterly antagonistic. In any case, his property has been taken from him compulsorily. [HON. MEMBERS: "And paid for."] I am not arguing about payment. Whether the owner wants to get rid of it or not, he has to sell it on a compulsory purchase order in return for an agreed sum of compensation.
As the Minister without Portfolio knows—he knows this better, perhaps, than many hon. Members—there is often a good deal of debate and discussion about the compensation. Even when the compensation is eventually fixed by the district valuer and after consultation between the district valuer and the advisers of the property owner, very often the owner is left feeling that he is not getting a fair sum. This is not the argument I shall develop on the Amendment.
7.15 p.m.
Let us suppose that in the case of a compulsory purchase the sum that has been agreed as compensation yields some element of capital gain. Some persons will not suffer, if I understand the Bill correctly. I do not think that anybody could place his hand on his heart and say that he understands the Bill completely. I am absolutely sure that the Ministers do not understand it. That has become quite clear from the speeches we have heard over the last few days. I may not be right in this, but it seems to me that owner-occupiers who receive compensation, if their house is compulsorily acquired for some purpose, will probably be able to claim relief under Clause 28. In those cases they will not pay tax on any gain arising from the compensation sum paid to them.
There are many cases where hardship will occur. Let me give some examples—it is always best to give personal examples, if one can—from what is happening in my own constituency. In Wycombe, that very thriving and go-ahead area set amongst beautiful countryside in Buckinghamshire, there has been a need for very many years for a by-pass. Anybody who has had to drive along the road from London to Oxford will be relieved to hear that the by-pass is now in course of construction. During the next year or


two a splendid new by-pass will be built, like a motorway, which will enable the motorist to pass through the attractive, but, nevertheless, slightly irritating town of High Wycombe.
There is another project within the town itself called the inner relief road which will involve the demolition of a great de al of property in order to provide further traffic relief. In both cases there has had to be the acquisition of quite a lot of property. Some of it has been farm land. Some of it has been gardens. Some of it has been private houses. Some of it has been businesses.
I will quote just three typical examples of the type of case which is arriving and which will arise in my constituency. The first case is of two elderly spinsters who have for some years been living on the rental income of a row of three non-rent-controlled houses. As I understand it, they will not be able to claim exemption under Clause 28 on any gains arising out of compensation sums paid to them for the acquisition of those three houses. Therefore, they will find themselves with a smaller capital sum in real terms, after deducting the capital gains payment at the rate of 30 per cent. on the gain, than they had before. This is likely to affect the income that they get from that sum.
The second case is of a man of 62 running a small business. His property is to be acquired. As is the case with many development schemes in town centres, other shop premises are to be built in a nearby area where the development is taking place. This man is being offered another shop, but at a rental which he cannot possibly afford. It is well known that in all these new developments in town centres, especially in old towns, the rentals which are being asked for shop property in newly developed areas are very high. A shop proprietor who is dispossessed and whose property is demolished and replaced by modern, up-to-date and highly expensive buildings, is faced with a rental which it is quite beyond his capacity to pay. He just cannot see how he could possibly meet it.
In these circumstances, he will have to find premises elsewhere, probably in an unsuitable area and probably of an entirely different type. This is a man of 62 who had looked forward to continuing in his business, earning a modest income

from his trading for probably another five to eight years, retiring perhaps when he reached 70, selling his business at the age of 70, and then probably having to pay a Capital Gains Tax, but, in the intervening period, earning a reasonable income from the business.
Now he will find himself with a sum of money which he is not able to invest in another business. He cannot face the struggle of looking round for other premises and starting all over again somewhere else. He will be faced with the position where he has a sum of money less the deduction of 30 per cent. upon the estimated capital gain. His income will be seriously affected.
The third case is that of a small limited company. The company I have in mind, which is having its business premises taken over, has to find premises elsewhere. It cannot find suitable premises in the same town. It must move away to some other area. In this case the only way in which the people concerned find that they can keep in business is to buy another business.
If I understand the Bill correctly, under Clause 31 if a sum realised on an asset is reinvested in one of the four classes listed in that Clause no Capital Gains Tax is payable. But in the case of a business which has had compensation for goodwill and is having to buy another business, for which it is having to pay for goodwill and is having to buy other assets, such as fixtures and fittings and assets which do not come under the heading of fixed plant and machinery, it will be found that the sum which the business will receive in compensation will be subject to Capital Gains Tax at 40 per cent. on some part at least of the element of compensation which is regarded as capital gains. This happens although it will have to pay for the new business that it wants to acquire a sum at least equal to the gross compensation paid to it when its own business was taken over.
The Minister without Portfolio looks puzzled, but I hope that I have made it clear. I am sure that my hon. Friends can produce other examples of hardship which will be suffered if, as a result of compulsory acquisition, compensation is paid which will be liable to a Capital Gains Tax. If it is assumed that the


compensation paid is fair and reasonable and is sufficient to replace the asset loss and all other things being equal, will yield the same income, what is happening is that through no choice of the individual affected by the compulsory purchase order, Capital Gains Tax will reduce the value of the asset by 30 per cent. for the individual or 40 per cent. for the small company.
It is bad enough, in all conscience, to have a compulsory purchase order imposed which forces one out of one's property in which one has lived or traded for many years and which one does not want to leave. This causes a great deal of heartache and hardship, but insult is added to injury by imposing a Capital Gains Tax on a theoretical gain which has arisen as a result of compulsory purchase. Surely this is going too far.
I am certain that whoever drafted this legislation did not intend to impose hardship of this kind. This is not a question of talking about big tycoons, great landowners, people with plenty of money, and gamblers. These are small businessmen, owners of a little property with no great resources who, being forced to move somewhere else, must have a sum of money to replace the asset which they have lost. This is all they ask for. They are not asking for an additional gain, but enough to replace the asset lost and to put more money towards replacing the property, whether it is houses or a business.
I leave the question of the effect on farmland to my hon. Friends. There is an important problem which affects that as well. I hope that even if the Minister is not prepared to accept the Amendment as drafted and is able to show that the effect of it is not quite what we intended will, nevertheless, accept its spirit. Reasonable man as he is, I am certain that he understands the type of case that I have presented to the Committee, and I am certain that he can find a method of relieving hardship in cases of this kind. I anticipate with confidence, and I trust that that confidence will not be misplaced, that when the Minister replies he will be able to meet us on the Amendment.

Several Hon. Members: rose—

The Minister without Portfolio (Sir Eric Fletcher): It is always a great pleasure to reply to the hon. Member for Wycombe (Mr. John Hall). He always presents his arguments persuasively and eloquently and although I noticed that a number of his hon. Friends rose to support the Amendment I doubt very much whether any of them would have been able to give greater force to the admirable way in which it was presented.

Mr. John M. Temple: The hon. Gentleman may have overlooked the fact that another Amendment in my name was selected with this Amendment and I have not had the opportunity of putting the case for that Amendment at all.

Sir Eric Fletcher: I was not intending to disparage anything that the hon. Member for the City of Chester (Mr. Temple) might want to say. I was trying to pay a compliment which I hope the hon. Member for Wycombe will not think ungracious. I was trying to express my admiration for the eloquent way in which he had presented the case for this Amendment, because I know how devoted he is to the very pleasant part of Buckinghamshire which he represents. I appreciate also the great concern that he feels for the constituents whose cases he quoted and who he thinks may well be adversely affected by this part of the Bill about which he is now complaining. I thought therefore that the least I could do was to respond immediately to his request to me to see whether it was possible to meet in an accommodating spirit the suggestion which he has so amiably put forward. I therefore feel that it is my duty to explain the difficulties, which the hon. Member will appreciate, that stand in the way of acceptance of the Amendment.
A great deal of the hardship about which the hon. Member complains does not arise from anything in the Bill. In so far as hardships arise at all in all the cases that he quoted, they arise from the fact that from time to time local authorities have to rely on compulsory purchase powers for the acquisition of property. No one doubts that it is often a matter of great inconvenience and hardship to persons, whether it is a case of agricultural land or of houses, if they are dispossessed as a result of the exercise of compulsory


powers, but Parliament granted these compulsory powers at the request of both political parties. Therefore, we cannot on this occasion complain about the effects of compulsory acquisition. The only matter to which we can devote our attention on this Amendment is to whether it would be reasonable or unreasonable to exempt from liability to Capital Gains Tax those who realise a capital gain by reason of a compulsory acquisition.
The Committee has adopted the principle that a Capital Gains Tax should be introduced. The Committee has also adopted the principle that liability to Capital Gains Tax should not be limited to a voluntary disposal of property. The Committee has agreed that liability will arise, for example, on death. It follows that if we are to have liability not limited to the voluntary disposal of property it is logical that the liability should also arise if there is a capital gain resulting not from a voluntary disposal of property but from a compulsory acquisition of property. In both cases, the individual concerned has, in fact, realised a capital gain. He may have realised it involuntarily. He may complain that he has not had enough compensation. If he has not had enough and he has not had a capital gain, he has no complaint arising under the Bill although he may complain about the compulsory acquisition.

Several Hon. Members: rose—

7.30 p.m.

Sir Eric Fletcher: I must just finish the logic of it. I am always ready to give way, but it is much simpler to finish one's argument and then give way; otherwise, one's train of thought is unnecessarily interrupted and the proceedings are delayed.
If, on a compulsory acquisition, a person receives a large payment of compensation for his property—and that does happen—he has nothing to complain about and he is as well off or, perhaps, better off than if he had sold his property. Some people get as much when their property is compulsorily acquired as when they sell it voluntarily. If, as a result of such a transaction, that person has made a substantial or even a modest capital gain, there is no reason why it should not be taxed. In fact, it would be an injustice to all other citizens if it were not so. That, in a nutshell, is the reason

why it would be quite impossible for the Government to accept the Amendment.

Mr. John Hall: The point on which I wished to intervene has gone past, but perhaps I may put this now to the hon. Gentleman. He compared the compulsory acquisition of property with involuntary dispoal on death when, automatically, Capital Gains Tax may arise. Quite apart from the fact that, when one is dead, one is, thank heavens, free from taxes, if the hon. Gentleman takes that point he ought, perhaps, to consider applying the £5,000 relief to compulsory purchase.

Sir Eric Fletcher: That is another matter which does not arise on this Amendment. This is a very simple point. Hon. Members can repeat almost ad nauseam their objections to a Capital Gains Tax in principle, and they are free to continue to do so; but, if there is to be a Capital Gains Tax it ought to be one which operates fairly and equitably among all citizens. It does not make sense or do justice to their arguments if, once the principle of the Capital Gains Tax is accepted by the Committee, hon. Members put forward all kinds of people as deserving exemption from it. If that argument is pursued, it must result in injustice, and what I am trying to show here is that there is no injustice suffered under the Capital Gains Tax to persons who, in fact, realise substantial capital gains as a result of compulsory acquisition. Any grievance they might have against the community arises from the whole theory of compulsory acquisition, but that is a very different matter and has been accepted by Parliament for many years.

Mr. Edward Heath: The hon. Gentleman is not dealing with the point which concerns most hon. Members of the Committee. He will accept that, although he speaks of the Committee having accepted the various matters which he describes, we have bitterly opposed very large parts of them because we consider that, far from establishing justice, the Government's proposals establish injustice.
The point I make at this stage is that this is a forcible realisation. Leaving aside all question of whether a person thinks he has got the right amount of


Money or not, in many circumstances he may wish to replace what is being forcibly realised. His shop is taken. He wants to replace that shop. But he cannot do so because the Government take 30 per cent. of it. This is the simple point about compulsory acquisition, and all we are saying is that there is no justice in the State forcibly acquiring a man's shop and then the man not having the money to replace it somewhere else.

Sir Eric Fletcher: The problem of replacement is not limited to the case of a person whose property is acquired. Plenty of people sell their property voluntarily with a view to replacement or moving elsewhere, and there are provisions in the Bill about that in the case of traders. It is common to all citizens, whether they sell their property or whether it is compulsorily acquired, that they have the problem of acquiring something to take its place. There is no distinction between the two cases on which to found that argument.

Mr. Heath: The Minister will recognise the difference between doing something voluntarily, when one has to accept the consequences of one's action, and something being forced upon one by the State through compulsory acquisition. Surely, even the Minister in his most courteous mood can recognise that.

Mr. Temple: I am extraordinarily puzzled by the Minister's attitude. He has argued the case on the basis that we think there is something wrong with the compulsory purchase procedure. We do not think that at all. My hon. Friend the Member for Wycombe (Mr. John Hall) had a splendid grip of this aspect of the Bill. He seemed to play the Bill as though he was playing a piano, picking on this provision and that with enormous skill. He had the Minister himself puzzled throughout almost the whole of his speech because it was so intricate and brilliant.
I have taken part in the Committee stage of many Bills since I have been in the House, and I cannot recollect an occasion when an Opposition Front Bench spokesman has said that he was making the case with the exception of the most important part and that he would leave that to one of his hon. Friends. In fact, my hon. Friend knew

perfectly well that there was an Amendment down in my name which dealt with, I think, the most delicate and important part of this subject.
The Minister without Portfolio said that he wanted a Capital Gains Tax which was fair and equitable. I draw his attention to the precedent set by my right hon. and learned Friend the Member for Wirrall (Mr. Selwyn Lloyd). When he introduced his Capital Gains Tax, he added a special provision to cover land and buildings acquired compulsorily. My right hon. and learned Friend is a man of very fair judgment. When he introduced the Finance Bill of 1962, there was no special provision to deal with this matter. It was put forward as a special case in Committee and accepted in principle by my right hon. and learned Friend. Then my right hon. Friend the Member for Hampstead (Mr. H. Brooke), then Chief Secretary to the Treasury, accepted the argument on Report and brought forward what is now paragraph 16 of the Ninth Schedule to the Finance Act, 1962.
I admit that, before the Minister without Portfolio spoke, I had it in mind to make a comparatively short speech just to put the case on behalf of farmers, but he has given me no encouragement whatever to put the case shortly. It is a powerful case, and I shall do by best to see that it is presented very fully to the Committee.
My right hon. and learned Friend the Member for Wirral precedented the case for a special exemption being given under Capital Gains Tax in the event of land and buildings being compulsorily acquired. My hon. Friend the Member for Wycombe said that there were cases in which parts of agricultural holdings would be acquired. I believe that this case rests not only on the case of the whole of a farm being taken—that is unusual—and the more powerful arguments arise in the event of partial acquisition of a farm.
I shall have to give one or two examples. Take the case of a 100-acre farm which has, say, 10 acres taken from it for the construction of a new bypass or trunk road, or for some other purpose. The farmer, if he is the owner-occupier, gets full compensation and may get additional compensation from the acquiring authority under the Agriculture (Miscellaneous Provisions) Act, 1963.


But my argument does not rest on the case that he either gets too much or too little, but on the fact that he gets compensation and that, with that compensation, he is required, under Clause 31, to reinvest the money, if he is to avoid the Capital Gains Tax, in a similar form of investment.
Here is the great difficulty. The small farmer, or even the large farmer, has practically no chance of acquiring another 10 acres of land adjacent to his holding. If he wishes to acquire a similar investment the only thing he can do is go to another part of the county or of the country to find a somewhat similar piece of ground, possibly not of the same acreage but of the same value. A holding today is normally managed by the farmer and one worker, or possibly by the farmer himself alone. It is unrealistic to think that a farmer can run two holdings fragmentated just because he has to reinvest the money that he has acquired through the compulsory acquisition of his land.
If the Minister pursues his argument and insists upon these conditions in Clause 31 he will bring about the fragmentation of holdings and will succeed in sending farmers round the country in order to acquire a similar type of object—in this case, a piece of agricultural land—so that they can avoid being caught by Capital Gains Tax by reinvesting like with like.
If the hon. Gentleman pursues his argument, anyone who has agricultural land or buildings compulsorily acquired will immediately have to set about acquiring, for a similar value, agricultural land or buildings in another part of the country—it will not matter where because he will be able to do it within a wide area. He will then look for a holding that he really wants. When he finds that, he will be able to sell the holding he had to acquire quickly as a result of compulsory purchase and set himself up once again.
I must point out that it is extraordinarily difficult today to get an agricultural holding at all. It is even more difficult to get a holding which is comparable in size and value with the one from which one has been dispossessed. I have made the case with regard to the whole of a holding, but the case is in-

finitely more difficult where there is a partial acquisition.
The Minister of Housing and Local Government addressed a Women's Institute conference in London this week. He informed the assembly that it would be necessary to acquire a great deal of land, particularly in the South-East, for housing the enormous amount of overspill he expects. So this is not an imaginary problem. It will face not only the South-East, but the North-West as well. I see that my hon. Friend the Member for Runcorn (Mr. Carlisle) is here. Runcorn is an important new developing town, very close to the City of Chester. This is a problem which will affect many parts of the country.
I cannot believe that the arguments of the Minister in rejecting the Amendment would be as valid if they were deployed specifically against my Amendment No. 353, which would limit the scope of the application of this exemption specifically to land and buildings. The case for the exemption of land and buildings is almost overwhelming and I hope very much that the hon. Gentleman will address himself to the serious case I have put forward, which is well precedented in the 1962 Act.
While I am referring to the 1962 Act, perhaps I may say that it was a pleasure to get hold of an Act which runs to about 35 Clauses and a few Schedules. How much better and wiser it would have been for the Government not to have embarked on this enormous Bill. I do not believe that the Ministers in charge understand the whole of its ramifications.

The Deputy-Chairman: Order. The hon. Gentleman is getting away from the Amendment.

Mr. Temple: I was about to say, Sir Samuel, that they do not understand the ramifications of the Bill, particularly the ramifications of the effects of compulsory purchase. I hope very much, therefore, that we shall have a more satisfactory reply, addressed specifically to Amendment No. 353.

7.45 p.m.

Mr. R. H. Turton: I am sorry to say that the Minister without Portfolio, I thought, dealt with this very serious Amendment with a degree


of levity. This is one of the most difficult parts of the Bill. The compulsory purchase payment has many elements. There is the element of the replacement of land. There is the element of severance. There is the element of disturbance. One cannot validly compare the April, 1965, value or the value when acquired with the amount of the compulsory purchase payment, because one is comparing unlike with unlike. We have to find a solution for the problem.
I can give instance after instance in my area where, quite clearly, to apply this Clause without amendment will cause great injustice to small people. I can think of one case where, at present, there is the project of a by-pass round the town and a small market gardener is refusing to vacate his market garden until the compulsory purchase order comes, because he cannot find anywhere else to carry on his trade. Eventually, when the order goes through, he will be given compensation not only for his land but for disturbance. But he will then have a 30 per cent. Capital Gains Tax levy on that.

Mr. Donald Chapman: But Clause 31 will allow a further 12 months in which to find alternative land for his holding, and that need not be in the immediate area. It is not right to say that this man will have no option when dispossessed but to pay this tax.

Mr. Turton: I am grateful for that intervention. It is what I expected. In this case, the market gardener has for three years been trying to find some place else to have his market garden. It is not easy, especially in developing areas such as the North-East, to find land for market gardens.

Mr. Dance: Surely the hon. Member for Birmingham, Northfield (Mr. Chapman) has missed the point—that one does not necessarily find an alternative farm or accommodation within the same area. My right hon. Friend the Member for Thirsk and Malton (Mr. Turton) is bringing out this point extremely well.

Sir Eric Fletcher: On a point of order, Sir Samuel. It might be for the convenience of the Committee if I put this

point to you. The speech of the right hon. Member for Thirsk and Malton (Mr. Turton) is directed at the moment to the difficulty of finding a replacement as alternative accommodation following a compulsory purchase order. On Clause 31, which deals with replacements, there are a number of Amendments to be considered designed, inter alia, to extend the period. Perhaps it might be more convenient to deal with this matter when we reach Clause 31.

Mr. Turton: Further to that point of order, Sir Samuel. That would not be a satisfactory way of dealing with this. I am not dealing with replacements but with the compensation of people who cannot get any replacements. That is the difference. There are three factors in a compulsory purchase—the land, the severance and the disturbance. There are many cases when people have no way of using Clause 31 in mitigation, and so we return to this Clause.
Let us consider severance. With all the improvements of the Great North Road through my constituency there have been farmers who, most unwillingly, have had to give up areas of their farms because the road cut right through the farms. They have had enhanced compensation because of the disturbance to their farms. They cannot go and find three acres to add to the farm to try to get a unit, and so they get compensation. I may add that the payment is usually not assessed until some three years after the road has been built, and I have known of one case in which it was six years. This is one of the difficulties which will have to be dealt with. It is quite wrong to assess a tax on the difference between the acquiring value, or the 1965 value, and the payment actually made by a local authority for a parcel of land.
When this proposal is compared with the way in which the Committee has already dealt with similar compensation under subsection (6), the inequity becomes even greater. Under subsection (6), anyone who receives compensation for injury to his person or vocation generally is to be exempted from paying Capital Gains Tax on it. I presume that the "golden bowler" will not be subject to the tax, but my little farmer with the road thrust right through his farm will be.
The right way to deal with this matter is to try to extract from the compensation payment that part attributable to severance or disturbance, and like could then be compared with like. I hope that the Minister will address himself more seriously to what may constitute a very great inequity to many people who will find it very hard to bear.

Mr. Chapman: The argument of hon. Members opposite is misguided. If there is a case—and I very much doubt it—the right way to correct the matter is by an Amendment to Clause 31, which I shall not debate now. What the right hon. Member for Thirsk and Malton (Mr. Turton) has said is that there may be cases, and in his knowledge there are, coming under Clause 26 where a man, once dispossessed, cannot find a piece of land or business which is in the same class of asset as defined in Clause 31 and in which he can reinvest his money within 12 months.
If that is true, and I shall be interested to listen to the case with a perfectly open mind, the right answer is to broaden the class of assets within which he may change the disposition of his money within the 12-months' period under Clause 31. That and not the way of the right hon. Gentleman is the right way to deal with this matter. What the right hon. Gentleman is suggesting would drive a coach and horses through the whole concept of the realisation of capital gains.
What I have suggested would be a much more logical and fair way of doing it and would give greater leeway in these difficult cases, more room for manoeuvre, if it could be proved to be needed when we reached Clause 31. At the moment, we should be very misguided if we accepted the Amendment.

Mr. Mark Carlisle: I cannot accept the view of the Minister without Portfolio that as a Committee we have already in principle accepted that tax should be paid on assets which are disposed in this way. There is a complete difference of principle between the voluntary disposal of assets and the disposal of assets unwillingly, involuntarily and as a result of administrative decisions by the Government, or a local authority. It cannot in any way be

social justice for a person whose livelihood is taken from him against his will by an administrative decision to be told that nevertheless he is to be taxed on any gain which may have accrued.
I want to deal with the Amendment as it affects my constituency. As a new town, Runcorn is concerned with a new town development corporation and, because of this, many farmers in the area are about to have their land compulsorily purchased. They do not want to give it up and they do not want to lose the livelihood. I am sure that they accept that, the decision having been made that the new town is necessary, they will lose their land, but it is not sufficient to say that they can avoid taxation by turning to Clause 31—if they succeed in understanding it—to see how they can be exempted from taxation.
Firstly, as it stands—and we do not know what will happen to Amendments to Clause 31—the Clause says that money has to be reinvested within a period of 12 months. As my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) said, many of these people cannot easily acquire other farmland. In Cheshire, for example, farmland is not easy to acquire at the moment and although they might like to acquire a similar farm elsewhere and to reinvest their money it it, in practice many of these people will not be able to do so.
On top of that, it is absolute nonsense to limit the time in which a person should be able to avoid taxation on the paper gain from the sale of the asset by reinvesting it in a similar asset when the whole working of the new town development corporation is on the basis that a man is encouraged to dispose of the asset in advance of the time when he will have to leave the farm. The purpose of the Amendment is simply to allow him longer to look around for an alternative farm. As things stand, a man is being encouraged to negotiate to dispose of the assets to the corporation in advance of the time when it is required for development, but, having done that, he will be unable to take advantage of Clause 31, because the time limit will have been passed before he gets to the stage of reinvestment, even if he is able to find a similar farm.
The second consideration affects not so much the man who loses his whole


farm as the man who loses part of his land, the example to which my hon. Friend the Member for the City of Chester (Mr. Temple) referred. Someone near a new town area may have part of his land acquired—it may be a farmer part of whose land is acquired for the purpose of building a new road, or something of that nature, a socially necessary acquisition of the land by the community, but thoroughly awkward and annoying for the man concerned. He is paid compensation, and that compensation has three elements. He is compensated for the value of the land, for the severance which may have occurred and, most important, for the injurious effect on the remaining part of the holding due to the loss of part of the farm. In other words, if a man with a Cheshire farm of 80 acres loses 30 of it, in calculating the compensation for those 30 acres I understand that the fact that he has only 50 acres left is taken into account in assessing the effect on his livelihood. Surely it cannot be seriously suggested by the Government that that part of his compensation is a capital gain accruing to his farm.
8.0 p.m.
Is the farmer not only to lose part of his land and to have his means of earning a livelihood reduced, but in addition to be taxed on compensation give against future loss of income? Even under this Government and the recent Price Review, surely a farmer is entitled to expect, as the return for his work on the farm, to get something more than merely the equivalent return which he would get by investing the money in some form of security. It is wholly wrong in principle that involuntary dispositions of land should attract taxation by the Government.
When one considers the Clause in detail, one realises that it is full of injustice. It is not a question, as the Minister suggests, of getting social justice by putting one's brush over the full area of capital gain. In fact, it leads to injustice. I hope that if the Minister is concerned, as the Chancellor of the Exchequer has said on many occasions that he is concerned, to institute a Capital Gains Tax which is socially just he will reconsider the speech which he made on

this issue and accept this Amendment or some Amendment later which will deal with the points which we have raised.

Mr. Bessell: There is one point which I should like to raise in supporting the Amendment, which I believe is a very important Amendment and which I hope will have the very careful consideration of the Minister without Portfolio and the Chancellor of the Exchequer. It concerns a person who owns a business or a farm and who has to part with his possession under a compulsory purchase order and then, because he is unable to buy a similar business or farm, reinvests his money in a business of a different type.
The Financial Secretary was unequivocal the night before last in stating that when an individual sold a business of a particular kind and reinvested the money in a different business he would be subject to a Capital Gains Tax. Are we to understand that somebody whose business is taken from him, at however equitable a price, under a compulsory purchase order and who is unable to reinvest his money in a similar business will find himself in the same position as a person who makes a voluntary sale? If so, I believe that there is a very grave injustice which must be corrected.
There is often a very long delay between the notification of a compulsory purchase order and its execution. I have a case in my constituency at the moment of someone who was notified two years ago that his house would be acquired under a compulsory purchase order when a road widening scheme took place. He has not been able to do anything with his property. He has not been able to sell it, quite understandably, and I do not want to enter into the rights and wrongs of that case.
But if the Clause goes through unamended I can foresee a situation in which somebody is notified of a compulsory purchase order and a long delay—perhaps as much as five or six years—takes place before the order is executed, during which time he suffers a considerable loss on the value of his property. Nevertheless, any increase in its value which may have taken place in the intervening years which he might offset against


that loss he would again lose by virtue of this tax being applied under the compulsory purchase order.

Mr. Chapman: How could he lose money over a period of years as a result of the threat and the property at the end be worth more?

Mr. Bessell: It is normal—and I am sure that the hon. Gentleman realises this—that when the value of the property is assessed for the purposes of the compulsory purchase order to take it at approximately current market value. But during the intervening period the owner will not have had the benefit of his money which he might have had if the compulsory purchase order had been executed at the time that he was notified. There is no question about this. There are many examples of this injustice. If the hon. Gentleman wishes, I will be pleased to supply him with a number of examples.
There are two points which must be clear to most hon. Members, even if they are not clear to the hon. Member for Birmingham, Northfield (Mr. Chapman). What is the position of the person who is compelled to sell his business and is unable to reinvest his money in an identical business? Secondly, what is the position of a person who suffers delay in selling his property by virtue of a compulsory purchase order which is not executed for some years? These are important issues which must be cleared up. I trust that the Opposition will press this Amendment to a Division.

Mr. Corfield: I must admit that when I saw the second eleven, so to speak, on the Treasury Bench I hoped that we should have a more realistic approach to the Amendment. Earlier, when the Financial Secretary was here and I made an intervention during discussion of a similar Amendment, I was taken to task for using argument. That is what we are here for. This is what I propose to endeavour to develop.
The Minister without Portfolio seemed to take the view that, good as the speech of my hon. Friend the Member for Wycombe (Mr. John Hall) was, he had said all that there was to be said, that he, the Minister, did not agree with it and did not intend even to consider that something more could be said which was worth listening to. I hope that that does

not sum up his attitude, because we on this side of the Committee feel strongly that there is a distinction in this type of disposition.
The whole basis of compensation for the compulsory acquisition of land is that the land concerned should be left neither worse off nor better off. In other words, the purpose is that he should not make a profit. Therefore, on the face of it, to charge a tax on a gain, which is another word for a profit, would appear to be a nonsense from the outset.
The Minister went on to say that we had accepted this Capital Gains Tax, and my right hon. Friend the Member for Bexley (Mr. Heath) properly pointed out that that was a slight euphemism of the English language, whatever it might mean in strict constitutional terms. But, having saddled the country with this tax, we have a situation in which the Minister says, "But we have extended this to involuntary dispositions on death. Therefore, it is logical to extend it to every other involuntary disposition".
None of us has control over the date on which we die or the state of our affairs at the time. Throughout our law there are distinctions as to the way in which we deal with the estates of deceased persons and the way in which people manage their affairs while they are alive. The great distinction is that in all other cases it will be entirely open to the individual to manage his affairs so that he has a choice as to when a disposition of an asset takes place on which Capital Gains Tax might be levied.
This is one of the main differences. There is no choice of timing. This again, I suggest, is something which gives rise to a prima facie case which, on its own, wants special consideration.
My hon. Friend the Member for the City of Chester (Mr. Temple) has dealt with some of the agricultural problems. He might have added, as I am sure was at the back of his mind, that the very fact that all this land is lost every year, with approximately the same number of farmers seeking it, means that it becomes increasingly hard to find alternative premises. The Minister suggested that this should be cured by extending the time under Clause 31. That, however, is only a small part of
the problem, because the chances are that the man must buy at a higher rather than a lower price, bearing in mind that a great deal of the purposes for which land is acquired in the countryside are purposes in which the basis of compensation is agricultural value and agricultural value only.
The point which I wish to take up is that touched upon by my right hon. Friend the Member for Thirsk and Malton (Mr. Turton) that the compensation figure in a normal case, to which my hon. Friend the Member for the City of Chester referred, is divided into several elements: compensation for the land taken, compensation for disturbance and compensation for severance from, and injurious affection to, the land that is left.
In my earlier intervention, the Financial Secretary seemed to think that it was almost puerile to suggest that one would not pay capital gains on the element of compensation due to injurious affection. Even if that is so and if the Government can deploy an argument to support it, how does one calculate it? This is an element of compensation which arises from the damage done to the land that is left as a result of the other land being taken away. The basis of compensation, both for severance and for injurious affection, is, so to speak, the difference between the before and after values: the value of the land before the severance compared with the value of the land that is left after severance. How on earth is one to tie that to anything on which a capital gain can be based? Must one go back and say that when the man bought the farm, the severance would have resulted in a lower figure of injurious affection and that, therefore, be pays Capital Gains Tax on the difference?
If that is done, what sense does it make? The whole purpose of this compensation is to compensate the man for the loss of profit on that which is left. It is something which will, one hopes—it seldom does—compensate him for the loss of profits over the years to come. To tax him at that point defeats the whole object of the exercise.
I suggest to the Minister without Portfolio—I hope that he is not now also the Minister without a brief—that he

should tell us how this will be done and, if he does not know, that he should take the matter back and examine whether it makes sense to include in particular these elements of compensation which are directly payable for the severance or injurious affection, let alone the disturbance which is paid to meet actual outgoings which the man has to find as a result of his disturbance.
I hope, therefore, that the hon. Gentleman will advert to this point. The fact that it is not an easy point calls for a full explanation from the Treasury Bench, including the reasons why right hon. Members opposite think, if they still do, that the Financial Secretary was right in saying that this was an element on which capital gains would be payable.

8.15 p.m.

Mr. More: The argument has been so ably argued by my colleagues on this side that I would not wish to add anything but for the fact that this is a problem which directly affects my constituency. We have in the Ludlow constituency the largest new town in England in course of early development and we are to have hundreds of examples of farms being bought compulsorily either in whole or in part.
I was glad to hear the explanation given by my hon. Friend the Member for Gloucestershire, South (Mr. Corfield), because it bears out how grossly inappropriate in the context of compulsory acquisition appears to be the formula under the Bill for calculating values and calculating the chargeable gains. The first thing that the Minister without Portfolio must do is to look at this formula in the light of compulsory acquisition.
The case which has been referred to by my hon. Friends the Members for the City of Chester (Mr. Temple) and Runcorn (Mr. Carlisle) of partial acquisition, which is of great importance, is something which I constantly see in my constituency. Farmers do not like being dispossessed. If they can hold on to their farmhouse, which is their home, they will do so but they might be losing 20, 50 or 100 acres of farm. To suggest that all they have to do is to go out and replace them by buying another 20, 50 or 100 acres is nonsense and not a reality. If they could find it at a distance, it would still not be a businesslike proposition. It means that they are faced with the choice


of losing their homes or facing permanently a reduction in the scale of their business.
When one considers that in the light of what has been so clearly expounded by my hon. Friend the Member for Gloucestershire, South as regards the compensation provisions and the whole basis on which it is calculated, the Comrnittee must realise that there can be no real fairness in the way the Bill is drawn.

Sir Eric Fletcher: I do not know whether it would be convenient at this stage if I tried to answer the questions which have been raised by hon. Members. I assure them that no discourtesy whatever was intended when I rose immediately after the hon. Member for Wycombe (Mr. John Hall), who moved the Amendment, because at that time I hoped, in answer to his request, that T should be saving the time of the Committee.
I appreciate that a number of serious problems have been raised by the right hon. Member for Thirsk and Malton (Mr. Turton), the hon. Member for Gloucestershire, South (Mr. Corfield) the hon. Member for Runcorn (Mr. Carlisle), the hon. Member for the City of Chester (Mr. Temple) and others and I am anxious to deal with the points which they have made. I must, however, preface my remarks by repeating that, although there are these cases in which difficulties arise, nothing that has been said in this debate leads me to modify in any way the conclusion which I expressed when I spoke earlier giving the reasons why it would he impossible for the Government to accept the Amendment.
The principle must remain that if anybody enjoys a capital gain as a result of a compulsory acquisition, he should be subject to the same Capital Gains Tax as if he had made a voluntary disposition. One reason is that apart from the particular cases which hon Members have in mind, and the circumstances of which I do not deny, there must be a whole range of other cases in which these problems do not arise. To make a general rule that nobody should be subject to a Capital Gains Tax if his property is compulsorily acquired and he derives the benefit of a capital gain would be irresponsible.
On the other hand, one recognises that there are special problems in connection with agricultural land. They do not arise, however, in connection with a great many other instances of compulsory acquisition in which people derive substantial capital gains which, in our view, on principle should be taxed.
I intervened earlier because it seemed to me that if this principle is accepted and if the Amendment is either withdrawn or negatived, it will be reasonable when we reach Clause 31—that was why I thought it premature to deal with it at this stage—and even more so when we come to paragraph 7 of the Sixth Schedule, to deal with some of these problems.
I will explain why. The hon. Member for Bodmin (Mr. Bessell) said that if somebody is dispossessed by virtue of a compulsory purchase order, he has difficulty in finding an alternative place to carry on his agriculture or his trade within 12 months. Amendments have been put down to Clause 31 to deal with that problem. There is an Opposition Amendment suggesting that the period should be extended from 12 months to three years. The Government realise the difficulty, and my right hon. Friend the Chancellor of the Exchequer has put down an Amendment which in certain cases will enable a delay beyond three years to take place. Therefore, that point is conceded.

Mr. Bessell: Would the hon. Gentleman address himself to the point that I made? What about the person who is dispossessed of his business under a compulsory purchase order, and is then compelled, in order to obtain a livelihood, to buy a different kind of business because he cannot buy a similar one? He is the person who will be badly penalised if the words of the Financial Secretary the other night are to be accepted.

Sir Eric Fletcher: I must be candid about this. At the moment, if somebody cannot rehabilitate himself in a similar business, he will not get the benefit of Clause 31, but we have not come to that Clause. There are a number of Amendments down to it. No doubt we can have a useful discussion about them, when we come to that Clause, and the point can be made then. It can be argued that there ought to be some


extension of that Clause, but that does not arise on this Clause.

Mr. Temple: Fragmentation would never be dealt with under Clause 31, however long the period of grace. I addressed myself to the problem of fragmentation.

Sir Eric Fletcher: Let me deal with that. Fragmentation arises more directly under Schedule 6(6) on page 130, about which we shall no doubt have a useful discussion when we reach that part of the Bill.
It may well be that problems of compensation and the incidence of Capital Gains Tax will arise where part only of an agricultural holding is compulsorily acquired. I think that it was the hon. Member for Runcorn who gave the illustration of a person with a holding of 80 acres, of which 30 were compulsorily acquired, and said that Parliament must make some provision for calculating the basis on which Capital Gains Tax is charged on any compensation resulting from that compulsory acquisition.
The Government's proposal is that that problem shall be solved by applying the formula set out on page 130. Admittedly it involves an algebraic calculation, but these matters are inevitably complicated. The Government have attempted to meet the situation by proposing a formula for arriving at the calculation of compensation which is fair and equitable. I have no doubt that Amendments will be put down to that part of the Schedule when we come to it, but it seems to us—and this is the basis of the Government's proposals on the subject of fragmentation—that if part of a person's land is acquired, two things have to be done: first, we may have to divide the compensation, and I shall come back to this, because I appreciate that compensation may include something for the value of the land, something for the severance, and something for injurious affection.
Let us assume a simple case in which there is only one element, a straightforward figure of compensation for—

Mr. Temple: Why not consider a complicated case?

Sir Eric Fletcher: I thought that it would be easier to deal first with a simple

case, and then come to a complicated one.
In a simple case in which, as the hon. Member for Runcorn suggested, 30 out of 80 acres are acquired, one has first to ascertain the basic value of the whole 80 acres, either at the 1965 price, or, if subsequently, the price at which they are acquired, because there is no price for the 30 acres. One has to ascertain the price of the whole. Then, if one looks at paragraph 7 of Schedule 6, one does a sum whereby one takes the compensation for the 30 acres, values the remaining 50 acres, calculates what represents the sum of compensation, and divides that by the compensation plus the then market value of the remainder. One then ascertains, by comparison, the original value of the whole, and one sees what is the appropriate capital gain applicable to the 30 acres which have been compulsorily acquired. We think that in that way a fair result is achieved. That is the simple case.

Mr. Corfield: rose—

Sir Eric Fletcher: In view of the many taunts that we have been receiving over the past few days that Ministers at this Box do not understand the Bill, I think it is important that occasionally we should show that we have made a thorough study of it and understand in complete detail how it works.

Mr. Corfield: The hon. Gentleman said that the case he gave was a simple one, in preparation for a more complicated one. Will he give us an assurance that all these valuations will be paid for by the empowering authority?

Sir Eric Fletcher: I would not have given way if I had thought that that question was to be asked.

Mr. Corfield: It is an important point.

Sir Eric Fletcher: Nevertheless, it interrupts the flow of my argument.
The right hon. Member for Thirsk and Malton, and the hon. Member for Bodmin asked a somewhat different question which will complicate the illustration which I have given, and that will arise where the amount of compensation is divisible as to part expressly for the value of land, and in part for disturbance, and so forth. This may well affect negotiations that take place in


future under our compulsory acquisition procedure. Where a sum of compensation was payable as a result of compulsory acquisition, it would not be reasonable for any Capital Gains Tax to be paid except upon that part of the compensation which was payable in respect of capital. If some part of the compensation is payable or can be properly appropriated to a non-capital element of the property acquired there will be no question of a capital gain arising on that part of the compensation.
Having stated that, it would be a mistake for me to pursue the matter in detail at this stage, because there are related matters which will flow from this decision that there should be capital gains on compulsory acquisition. They are matters which do not arise on this Clause but which arise partly on a later Clause and partly on a Schedule, and they may be the result of future negotiations arising out of compulsory acquisition.
I have done my best to explain the reasons why the Government cannot accept the Amendment, and I must ask my right hon. and hon. Friends to resist it.

8.30 p.m.

Mr. Dance: One of the greatest problems faced by hon. Members on this side of the Committee is that Ministers seem to have no idea what agriculture means—or do not want to take any interest in it. Until the Minister without Portfolio replied I had hoped that I would have got a more satisfactory answer from him about tenant farmers and the compulsory acquisition of their land than I heard previously from the Financial Secretary to the Treasury.
What is not realised is that the whole life of a tenant farmer has been built up in farming. His whole living has been in farming, and that is probably the case with his children. He probably has no other skilled knowledge, but his knowledge of farming is skilled. If his farm is compulsorily acquired he will, therefore, try to find another farm. A tenant farmer of mine has built up an extremely valuable milk round, starting from nothing. That is in addition to his farm. People like to buy his milk. It is not

sold through the Milk Marketing Board; it is his own milk.
I have been fighting for compensation for this man, and I hope that he will receive an adequate sum. What do the Government propose to do about him? When he hands over the milk round he will, quite rightly, have made a capital gain. Will it be subject to the tax of 30 per cent? It has taken him years to build up this milk round. Let us assume that he finds another farm. It will take him years to build up another milk round on comparable lines. That important point must be considered. I hope that the Government will take action in the matter, because this question is vitally important.
When my hon. Friend the Member for Gloucestershire, South (Mr. Corfield) was a Minister I fought for proper compensation for tenant farmers whose land was compulsorily acquired. Redditch is scheduled to be a new town, and many farmers in the area will be dispossessed in the near future. It is absolutely iniquitous that if these people make a small capital gain they should be charged on it. It is all very well for the hon. Member for Birmingham, Northfield (Mr. Chapman) to say that they can find another farm within a year. They cannot. I have said it twice and I will say it again; these farms just do not exist, and it is especially difficult when many farmers are dispossessed at the same time in the same area.
Such a farmer may be able to go into Wales, into a hill farm, but the question of good husbandry has to be borne in mind. A tenant farmer may have farmed his land really well for years, and may have made it productive. He may receive reasonable compensation when he is dispossessed. If he succeeds in finding another farm it is certain that it will not be in the same nick as his own. He will have to put in a lot more capital and money to bring it up to the same agriculture productivity as that of the land that he has has to give up.

Mr. Barnett: The farmer is not selling the land. The increase is in the manurial value, in which case he would have had to pay Income Tax before. He is not affected by the Capital Gains Tax. Under the old law he would have had to pay Income Tax.

Mr. Dance: That is the whole point. Hon. Members opposite do not understand farming or farmers. The farmer receives compensation when he goes out. If he has to pay tax on it, that is wrong. In any case this is not profit. This is compensation for disturbance. In my opinion, he should retain every penny and not be robbed of the 30 per cent. which the Government are taking. When listening to the explanation of this most complicated formula which was given by the Minister without Portfolio I wondered whether he had added in at the end the Hungarian.πr2

Sir Richard Glyn: I wish to ask my hon. Friend whether he has considered that if it be right that there are circumstances in which compensation is liable for Income Tax it would still be liable to Capital Gains Tax, also?

Mr. Dance: That is perfectly true.
The point I am trying to make, whether it be in respect of farming or businesses, is that we are being milked enough at present in respect of Income Tax without having this iniquitous tax which the Government suggests. It really is too much. I hope that this matter will be reconsidered. The tenant farmers are the backbone of our country. They save us millions of pounds which otherwise might be spent on imports. They should be protected and not milked in the way the Government propose.

Mr. Scott-Hopkins: I consider that the answer of the Minister without Portfolio was disappointing. He did not answer any of the points made by my hon. Friend the Member for Wycombe (Mr. John Hall) and it was not until my hon. Friend had intervened that he turned his attention to the main point of the argument and the basis of the whole case which we are advancing.
The Government have adopted the same attitude in this debate as to the other matters which we have discussed. The Minister's argument is that the principle of the Capital Gains Tax must apply regardless of equity and the damage which it may do and regardless of the consequences it will have not only on the farming industry, but on everyone concerned.
The Minister does not seem to be able to appreciate what we have been saying about these cases of compulsory purchases, where the person whose land or property is being acquired does not wish that to happen. I hope that the Minister will accept that there is a difference between a voluntary disposal of an asset, from which any gain would be liable to be taxed, and a compulsory purchase. We have heard several informed speeches from my hon. Friends and I do not intend to go over the whole argument again.
I ask the Minister to pay particular attention to the speech of my hon. Friend the Member for Gloucestershire, South concerning the splitting of the compensation factor. He has not answered the case which was advanced by my hon. Friend. I do not expect the Minister to intervene again, but I hope that he will study in the OFFICIAL REPORT what has been said so that perhaps at a later stage an Amendment may be brought forward that would be acceptable.
The arguments advanced by my hon. Friends the Members for the City of Chester (Mr. Temple) and Runcorn (Mr. Carlisle), concerning fragmentation, have not been answered properly. Where a part of a farm is hived off, a farmer is expected to reinvest the resulting capital within a period of a year. It may be that it will be expended in two or three years on a similar type of asset, but, as has been pointed out by my hon. Friends, it will be extremely difficult to do that. Farming land is becoming more scarce all the time, yet we are told that farmers should, when their land is compulsorily purchased reinvest in similar types of farms. I hope that the Government will realise how incredibly difficult it is for farmers to obtain other farms in these circumstances.
I agree that when the Minister dealt with the question of apportionment it appeared that he had done his homework. Certainly, he read his brief remarkably well. However, he did not answer the main burden of the argument adduced by my hon. Friends about the grievance that farmers have and the fact that it is almost impossible for them to find comparable farms.
The hon. Member for Bodmin (Mr. Bessell) spoke about compensation payments which were below average, yet the


Minister did not attempt to reply to that point. I could give many other illustrations of arguments being adduced and the Minister not replying to them. He cannot consider that he answered the discussion fully. It goes to show that the Government have not faced up to what they are doing. It is obvious that the Minister and his colleagues do not understand the implications of their actions on the farming industry and on other property and businesses. This is particularly true when we consider the Capital Gains Tax in relation to compulsory purchase orders.

My hon. Friends and I consider that the Government are being unjust by imposing this tax on people whose property and land is compulsorily acquired. I hope that after the amount of time and work we have put in on the Bill good sense will prevail and the Government will agree to consider this matter afresh. If not, I must advise my hon. Friends to divide the Committee.

Question put, That those words be there inserted:—

The Committee divided: Ayes 160, Noes 173.

Division No. 150.]
AYES
[8.43 p.m.


Agnew, Commander Sir Peter
Gurden, Harold
Murton, Oscar


Allan, Robert (Paddington, S.)
Hall, John (Wycombe)
Neave, Airey


Astor, John
Hamilton, M. (Salisbury)
Noble, Rt. Hn. Michael


Atkins, Humphrey
Harris, Frederic (Croydon, N.W.)
Nugent, Rt. Hn. Sir Richard


Barber, Rt. Hn. Anthony
Harris, Reader (Heston)
Onslow, Cranley


Batsford, Brian
Harrison, Brian (Maldon)
Osborn, John (Hallam)


Beamish Col. Sir Tufton
Harrison, Col. Sir Harwood (Eye)
Page, R. Graham (Crosby)


Bennett, Sir Frederic (Torquay)
Harvey, Sir Arthur Vere (Macclesf'd)
Peyton, John


Berkeley, Humphry
Hawkins, Paul
Pickthorn, Rt. Hn. Sir Kenneth


Berry, Hn. Anthony
Hay, John
Pounder, Rafton


Bessell, Peter
Heald, Rt. Hn. Sir Lionel
Powell, Rt. Hn. J. Enoch


Biffen, John
Heath, Rt. Hn. Edward
Price, David (Eastleigh)


Biggs-Davison, John
Hendry, Forbes
Prior, J. M. L.


Birch, Rt. Hn. Nigel
Hiley, Joseph
Pym, Francis


Black, Sir Cyril
Hill, J. E. B. (S. Norfolk)
Ramsden, Rt. Hn. James


Box, Donald
Hirst, Geoffrey
Rawlinson, Rt. Hn. Sir Peter


Boyd-Carpenter, Rt. Hn. J.
Hobson, Rt. Hn. Sir John
Redmayne, Rt. Hn. Sir Martin


Boyle, Rt. Hn. Sir Edward
Hopkins, Alan
Renton, Rt. Hn. Sir David


Brooke, Rt. Hn. Henry
Hordern, Peter
Ridley, Hn. Nicholas


Brown, Sir Edward (Bath)
Hornby Richard
Ridsdale, Julian


Bruce-Gardyne, J.
Hornsby-Smith, Rt. Hn. Dame P.
Roberts, Sir Peter (Heeley)


Buck, Antony
Hunt, John (Bromley)
Robson Brown, Sir William


Burden, F. A.
Hutchison, Michael Clark
Russell, Sir Ronald


Carlisle, Mark
Iremonger, T. L.
Sandys, Rt. Hn. D.


Cary, Sir Robert
Irvine, Bryant Godman (Rye)
Scott-Hopkins, James


Clark, William (Nottingham, S.)
Jenkin, Patrick (Woodford)
Sharp[...]es, Richard


Cooke, Robert
Johnson Smith G. (East Grinstead)
Shepherd, William


Cooper-Key, Sir Neill
Jopling, Michael
Sinclair, Sir George


Corfield, F. V.
Joseph, Rt. Hn. Sir Keith
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Craddock, Sir Beresford (Spelthorne)
Kerr, Sir Hamilton (Cambridge)
Stodart, Anthony


Crawley, Aidan
Kimbail, Marcus
Stoddart-Scott, Col. Sir Malcolm


Curran, Charles
King, Evelyn (Dorset, S.)
Studholme, Sir Henry


Dance, James
Kitson, Timothy
Summers, Sir Spencer


Davies, Dr. Wyndham (Perry Barr)
Lancaster, Col. C. G.
Talbot, John E.


d'Avigdor-Goldsmid, Sir Henry
Lloyd, Rt. Hn. Selwyn (Wirral)
Taylor, Edward M. (G'gow,Cathcart)


Dean, Paul
Longbottom, Charles
Thatcher, Mrs. Margaret


Deedes, Rt. Hn. W. F.
Lubbock, Eric
Thomas, Rt. Hn. Peter (Conway)


Doughty, Charles
MacArthur, Ian
Thompson, Sir Richard (Croydon,S.)


Elliot, Capt. Walter (Carshalton)
McLaren, Martin
Turton, Rt. Hn. R. H.


Elliott, R. W.(N'c'tle-upon-Tyne,N.)
Macleod, Rt. Hn. Iain
Walker, Peter (Worcester)


Errington, Sir Eric
McMaster, Stanley
Walker-Smith, Rt. Hn. Sir Derek


Eyre, Reginald
Marples, Rt. Hn. Ernest
Ward, Dame Irene


Fell, Anthony
Marten, Neil
Weatherill, Bernard


Fisher, Nigel
Maude, Angus
Webster, David


Fletcher-Cooke, Charles (Darwen)
Maudling, Rt. Hn. Reginald
Whitelaw, William


Foster, Sir John
Maxwell-Hyslop, R. J.
Williams, Sir Rolf Dudley (Exater)


Fraser,Rt.Hn.Hugh(St'fford &amp; Stone)
Meyer, Sir Anthony
Wilson, Geoffrey (Truro)


Ciles, Rear-Admiral Morgan
Mills, Peter (Torrington)
Wise, A. R.


Cilmour, Sir John (East Fife)
Mills, Stratton (Belfast, N.)
Wolrige-Cordon, Patrick


Clover, Sir Douglas
Miscampbell, Norman
Woodnutt, Mark


Goodhew, Victor
Monro, Hector
Wylie, N. R.


Crant, Anthony
Morrison, Charles (Devizes)
Younger, Hn. Ceorge


Griffiths, Peter (Smethwick)
Mott-Radclyffe, Sir Charles



Grimond, Rt. Hn. J.
Munro-Lucas-Tooth, Sir Hugh
TELLERS FOR THE AYES:




Mr. Ian Fraser and Mr. More.




Abse, Leo
Harper, Joseph
Orme, Stanley


Albu, Austen
Hazell, Bert
Oswald, Thomas


Allen, Scholefield (Crewe)
Holman, Percy
Padley, Walter


Atkinson, Norman
Houghton, Rt. Hn. Douglas
Page, Derek (King's Lynn)


Bacon, Miss Alice
Howarth, Robert L. (Bolton, E.)
Palmer, Arthur


Bagier, Gordon A. T.
Howell, Denis (Small Heath)
Pannell, Rt. Hn. Charles


Barnett, Joel
Hoy, James
Pargiter, G. A.


Bence, Cyril
Hughes, Cledwyn (Anglesey)
Park, Trevor (Derbyshire, S.E.)


Benn, Rt. Hn. Anthony Wedgwood
Hughes, Emrys (S. Ayrshire)
Parker, John


Binns, John
Hunter, Adam (Dunfermline)
Parkin, B. T.


Bishop, E. S.
Hunter, A. E. (Feltham)
Pavitt, Laurence


Blackburn, F.
Hynd, H. (Accrington)
Peart, Rt. Hn. Fred


Bottomley, Rt. Hn. Arthur
Hynd, John (Attercliffe)
Pentland, Norman


Bowden, Rt. Hn. H. W. (Leics,S.W.)
Irving, Sydney (Dartford)
Popplewell, Ernest


Brown, Hugh D. (Glasgow, Provan)
Jay, Rt. Hn. Douglas
Prentice, R. E.


Buchanan, Richard
Jeger, George (Goole)
Probert, Arthur


Butler, Mrs. Joyce (Wood Green)
Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Redhead, Edward


Callaghan, Rt. Hn. James
Jenkins, Hugh (Putney)
Rees, Merlyn


Carmichael, Neil
Jenkins, Rt. Hn. Roy (Stechford)
Roberts, Albert (Normanton)


Carter-Jones, Lewis
Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Roberts, Goronwy (Caernarvon)


Chapman, Donald
Jones, J. Idwal (Wrexham)
Robinson, Rt. Hn. K.(St. Pancras,N.)


Coleman, Donald
Jones, T. W. (Merioneth)
Rodgers, William (Stockton)


Conlan, Bernard
Kelley, Richard
Ross, Rt. Hn. William


Corbet, Mrs. Freda
Kenyon, Clifford
Sheldon, Robert


Cousins, Rt. Hn. Frank
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Shinwell, Rt. Hn. E.


Crawshaw, Richard
Lawson, George
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)


Dalyell, Tam
Ledger, Ron
Short, Mrs. Renée (W'hampton,N.E.)


Darling, George
Lever, L. M. (Ardwick)
Silkin, John (Deptford)


Davies, Harold (Leek)
Lewis, Arthur (West Ham, N.)
Skeffington, Arthur


Dell, Edmund
Lewis, Ron (Carlisle)
Slater, Mrs. Harriet (Stoke, N.)


Dempsey, James
Lomas, Kenneth
Slater, Joseph (Sedgfield)


Diamond, John
Loughlin, Charles
Small, William


Dodds, Norman
Mabon, Dr. J. Dickson
Smith, Ellis (Stoke, S.)


Donnelly, Desmond
McBride, Neil
Snow, Julian


Driberg, Tom
McCann, J.
Soskice, Rt. Hn. Sir Frank


Duffy, Dr. A. E. P.
MacDermot, Niall
Strauss, Rt. Hn. G. R. (Vauxhall)


Dunn, James A.
Mackenzie, Gregor (Rutherglen)
Summerskill, Hn. Dr. Shirley


Edwards, Robert (Bilston)

Swain, Thomas


Ensor, David
McLeavy, Frank
Tinn, James


Evans, Albert (Islington, S.W.)
MacMillan, Malcolm
Tuck, Raphael


Evans, Ioan (Birmingham, Yardley)
MacPherson, Malcolm
Urwin, T. W.


Fletcher, Sir Eric (Islington, E.)
Mahon, Peter (Preston, S.)
Varley, Eric G.


Fletcher, Ted (Darlington)
Mallalieu,J.P.W.(Huddersfield,E.)
Wainwright, Edwin


Fletcher, Raymond (Ilkeston)
Mapp, Charles
Walden, Brian (All Saints)


Foot, Sir Dingle (Ipswich)
Mason, Roy
Wallace, George


Foot, Michael (Ebbw Vale)
Mayhew, Christopher
Weitzman, David


Ford, Ben
Mellish, Robert
White, Mrs. Eirene


Fraser, Rt. Hn. Tom (Hamilton)
Mendelson, J. J.
Williams, Alan (Swansea, W.)


Freeson, Reginald
Mikardo, Ian
Williams, Mrs. Shirley (Hitchin)


Garrett, W. E.
Millan, Bruce
Williams, W. T. (Warrington)


Garrow, A.
Miller, Dr. M. S.
Willis, George (Edinburgh, E.)


Ginsburg, David
Milne, Edward (Blyth)
Winterbottom, R. E.


Gourlay, Harry
Molloy, William
Woodburn, Rt. Hn. A.


Greenwood, Rt. Hn. Anthony
Morris, Alfred (Wythenshawe)
Woof, Robert


Gregory, Arnold
Morris, Charles (Openshaw)
Yates, Victor (Ladywood)


Griffiths, Will (M'chester, Exchange)
Newens, Stan
Zilliacus, K.


Gunter, Rt. Hn. R. J.
Oakes, Gordon



Hamilton, William (West Fife)
O'Malley, Brian
TELLERS FOR THE NOES:


Hannan, William
Oram, Albert E. (E. Ham, S.)
Mr. Ifor Davies and Mr. Grey.

Mr. John Hall: I beg to move Amendment No. 345, in page 28, line 35, at the end to insert:
(7) In the event of the winding up of a body corporate or the bankruptcy of an individual the capital gains tax payable in consequence of and during the course of the winding up or the bankruptcy shall not exceed the amount (if any) by which the assets vested in the liquidator or the trustee in bankruptcy exceed the sums owing to the creditors of the body corporate or of the bankrupt.
I shall be brief, because the logic and justice of the Amendment are self-evident. I know that to say that is to invite rejection of the Amendment, but I press on, hoping for the best. The present

position on the winding-up of a body corporate or the bankruptcy of an individual is that should any assets realised during the disposal of a bankruptcy produce a capital gain the State will impose a Capital Gains Tax in the case of an individual in bankruptcy at 30 per cent., and in the case of a company or corporation at 40 per cent., even though the final proceeds of the liquidation may be insufficient to pay the creditors 20s. in the £. This may be of very little concern to the company in liquidation or to the individual in bankrutpcy, but it is of very great concern to the creditors, and


it seems incredible that the State should be so grasping.
I assume that the argument is that the State is a preferred creditor in respect of Income Tax or other tax on profits or income and should, therefore, be a preferred creditor in respect of Capital Gains Tax, but the circumstances seem to be quite different. In the first place, outstanding tax on profits or income relates to past earnings and is, I think, restricted to one year. The claim of the State arises in respect of past debt, and I accept it as reasonable that the State should rank with the other creditors in this case. I would not even say that it should not rank as a preferred creditor in respect of such outstanding debts on Income or other tax.
Capital Gains Tax is a quite different matter. Liability to the tax cannot arise until the company enters into liquidation or a bankruptcy order is served on the individual and the assets have to be disposed of under such an order. It is not until the assets are disposed of that the gain can be measured. It must be wrong that gains which arise on the selling of assets on liquidation or in bankruptcy should be liable to Capital Gains Tax in addition to the debt owing to the State or any Income Tax or other tax which might be payable when the realisation of all the assets of the individual or company are insufficient to pay the creditor the full 20s. in the £.
Why should the State place itself in such an extremely favourable and advantageous position against all other creditors in this respect? If Capital Gains Tax had arisen before liquidation or bankruptcy there might conceivably be some point in this exercise. There would be a debt due to the State because it had accrued before the event of liquidation, but to charge after liquidation when an asset is sold seems to be rubbing salt into the wound which the other creditors will suffer. It is both just and logical that where assets are insufficient to pay 20s. in the £ the State should forgo any capital Gains Tax and take it only if the assets exceed the sum needed to pay 20s. in the £ to all creditors.

Mr. Barnett: I have some sympathy for this Amendment, particularly in the case of a limited company which goes into liquidation, although I am sometimes surprised and appalled at the incredible

way in which businessmen can be so naïve as they sometimes are in giving credit to companies without making adequate inquiries.
There are many instances in which credit is given on a calculated risk, but there are often also flagrant cases of almost outright robbery in cases of liquidation in particular. It is strange that we send people to gaol for stealing a few shillings, but that there are cases of companies going into liquidation in ways which, clearly, are something which I hope we shall deal with soon, after we have considered the Jenkins Report on reframing company law. I should be stretching the bounds of order by moving into that field, but I hope that we shall soon have an opportunity to deal with company law, because it is a rather more important aspect of this matter than that dealt with by this Amendment.
The small point of the Amendment to give relief to creditors who are not paid 20s. in the £, should be conceded. The Revenue is a preferential creditor in those cases, but there are liquidations in which preferential creditors too are not paid in full and this would not cost the Revenue as much as may be thought.
Losses made on the sale of other assets by a liquidator are, for Income Tax and Profits Tax purposes, allowable as a set-off against any profit which a liquidator makes. Invariably, on a liquidation, there are substantial losses. It is, therefore, reasonable to ask that gains made by way of the sale of an asset should not be subject to Capital Gains Tax until after creditors have been paid in full. I should not like to see any surplus returned to shareholders. The Amendment does not ask for that. I believe that the Amendment is reasonable and should be accepted.

9.0 p.m.

The Solicitor-General: The hon. Member for Wycombe (Mr. John Hall) moved the Amendment with commendable brevity. I will endeavour to follow his example in replying. I regret that I cannot accept the Amendment. Before I give my reasons, I should say something about the way in which the matter will work. When an individual debtor is adjudged bankrupt, his property vests in the Trustee in Bankruptcy for the benefit of the creditors. This vesting will be a


disposal for Capital Gains Tax purposes and Capital Gains Tax will be chargeable by reference to the market value of the assets at vesting date. Disposal by the trustee will also be chargeable to Capital Gains Tax if the disposal is for more than the market value of the asset when it was acquired by the trustee. This happens after the vesting.
When a company is in liquidation, any vesting of its assets in the hands of the liquidator, or any disposal of its assets by the liquidator, will similarly attract liability to Capital Gains Tax. The Amendment would restrict the amount of tax payable in those circumstances simply to the amount by which the value of the assets vested in the trustee or the liquidator exceeds the sums owing to the creditors of the company concerned.
I appreciate that on the face of it it is an attractive proposition. Although the hon. Gentleman did not mention it, an exception of this kind is contained in the 1962 Act. That dealt with a short-term Capital Gains Tax designed to deal with speculative transactions. For reasons I shall state, it seems to me that such a provision as is here proposed was justifiable in the case of the short-term Capital Gains Tax. Somewhat different considerations arise in the case of a long-term Capital Gains Tax. In the case of a short-term Capital Gains Tax one naturally looks more kindly at the involuntary disposition, because the liability to a short-term tax depends on the two transactions happening within a certain period of time. An acquisition takes place and then a disposal takes place within six months or three years, as under the 1962 Act, or within a period of 12 months, as we propose in the Bill. In such a case it would be a hardship on the other creditors to take it against tax when the disposal is an involuntary one, because the owner of the property has at that period of time become insolvent. If that is done, the bankrupt's liability is added to because of circumstances beyond his control and, indeed, beyond the creditors' control, and the amount which is available for the other creditors is reduced.
I submit to the Committee that rather different considerations arise in the case

of a long-term tax. When one is dealing with a long-term tax one is not dealing with something fortuitous. One is dealing with something which eventually is inevitable. Long-term tax must be paid sooner or later.
In these circumstances, we have thought that when one is dealing with long-term tax, different considerations arise from those which arose under the 1962 Statute and we can see no reason why the Revenue in this respect should not rank equally with other creditors. It is not a question of priority. It is a question of ranking equally with other creditors.
To put the matter in another way, when one is dealing with a long-term tax there is a certain point of time—it may be when the asset is disposed of, or at death, or insolvency or investment in a trustee—when the tax becomes chargeable. But the tax has been accruing for a considerable time, year by year, admittedly until a final point is reached when it is only a contingent liability. Nevertheless, it is a real liability. We feel that in those circumstances we do not think that what otherwise would accrue to the Revenue should be lost because of this form of disposition.
Therefore, while we fully understand the argument put forward by the hon. Member for Wycombe and my hon. Friend the Member for Heywood and Royton (Mr. Barnett), unfortunately I feel that I must resist the Amendment.

Mr. John Hall: I congratulate the Solicitor-General on a very comprehensive reply, but I confess—and I think that the Committee will agree—that I found it a cold, legalistic, inhuman reply which has no relation to common sense or common justice. Unfortunately, our legislation being what it is, it sometimes happens that the effect of it is to create injustice and hardship, and I would have said that this is one of those cases which creates injustice and hardship. For these reasons, and because we are thoroughly dissatisfied with the reception given to the Amendment by the Government, I would advise my hon. and right hon. Friends to divide the Committee.
Question put, That those words be there inserted:—

The Committee divided: Ayes 162, Noes 174.

Division No. 151.]
AYES
[9.8 p.m.


Agnew, Commander Sir Peter
Griffiths, Peter (Smethwick)
Murton, Oscar


Allan, Robert (Paddington, S.)
Grimond, Rt. Hn. J.
Neave, Airey


Astor, John
Gurden, Harold
Noble, Rt. Hn. Michael


Atkins, Humphrey
Hall, John (Wycombe)
Nugent, Rt. Hn. Sir Richard


Barber, Rt. Hn. Anthony
Hamilton, M. (Salisbury)
Onslow, Cranley


Batsford, Brian
Harris, Frederic (Croydon, N.W.)
Osborn, John (Hallam)


Beamish Col. Sir Tufton
Harris, Reader (Heston)
Page, R. Graham (Crosby)


Bennett, Sir Frederic (Torquay)
Harrison, Brian (Maldon)
Peyton, John


Berkeley, Humphry
Harrison, Col. Sir Harwood (Eye)
Pickthorn, Rt. Hn. Sir Kenneth


Berry, Hn. Anthony
Harvey, Sir Arthur Vere (Macclesf'd)
Pounder, Rafton


Bessell, Peter
Hawkins, Paul
Powell, Rt. Hn. J. Enoch


Biffen, John
Hay, John
Price, David (Eastleigh)


Biggs-Davison, John
Heald, Rt. Hn. Sir Lionel
Prior, J. M. L.


Birch, Rt. Hn. Nigel
Heath, Rt. Hn. Edward
Pym, Francis


Black, Sir Cyril
Hendry, Forbes
Ramsden, Rt. Hn. James


Box, Donald
Hiley, Joseph
Rawlinson, Rt. Hn. Sir Peter


Boyd-Carpenter, Rt. Hn. J.
Hirst, Geoffrey
Redmayne, Rt. Hn. Sir Martin


Boyle, Rt. Hn. Sir Edward
Hobson, Rt. Hn. Sir John
Renton, Rt. Hn. Sir David


Brooke, Rt. Hn. Henry
Hopkins, Alan
Ridley, Hn. Nicholas


Brown, Sir Edward (Bath)
Hordern, Peter
Ridsdale, Julian


Bruce-Gardyne, J.
Hornby Richard
Roberts, Sir Peter (Heeley)


Buck, Antony
Hornsby-Smith, Rt. Hn. Dame P.
Robson Brown, Sir William


Burden, F. A.
Hunt, John (Bromley)
Russell, Sir Ronald


Carlisle, Mark
Hutchison, Michael Clark
Sandys, Rt. Hn. D.


Cary, Sir Robert
Iremonger, T. L.
Scott-Hopkins, James


Clark, William (Nottingham, S.)
Irvine, Bryant Godman (Rye)
Sharples, Richard


Cooke, Robert
Jenkin, Patrick (Woodford)
Shepherd, William


Cooper, A. E.
Jopling, Michael
Sinclair, Sir George


Cooper-Key, Sir Neill
Joseph, Rt. Hn. Sir Keith
Stodart, Anthony


Corfield, F. V.
Kerr, Sir Hamilton (Cambridge)
Stoddart-Scott, Col. Sir Malcolm


Craddock, Sir Beresford (Spelthorne)
Kimball, Marcus
Studholme, Sir Henry


Curran, Charles
King, Evelyn (Dorset, S.)
Summers, Sir Spencer


Dance, James
Kitson, Timothy
Talbot, John E.


Davies, Dr. Wyndham (Perry Barr)
Lancaster, Col. C. G.
Taylor, Edward M. (G'gow,Cathcart)


d'Avigdor-Goldsmid, Sir Henry
Lloyd, Rt. Hn. Selwyn (Wirral)
Thatcher, Mrs. Margaret


Dean, Paul
Longbottom, Charles
Thomas, Rt. Hn. Peter (Conway)


Deedes, Rt. Hn. W. F.
Lubbock, Eric
Thompson, Sir Richard (Croydon,S.)


Doughty, Charles
MacArthur, Ian
Turton, Rt. Hn. R. H.


Elliot, Capt. Walter (Carshalton)
McLaren, Martin
Walker, Peter (Worcester)


Elliott, R. W.(N'c'tle-upon-Tyne,N.)
Macleod, Rt. Hn. Iain
Walker-Smith, Rt. Hn. Sir Derek


Errington, Sir Eric
McMaster, Stanley
Ward, Dame Irene


Eyre, Reginald
Marples, Rt. Hn. Ernest
Weatherill, Bernard


Fell, Anthony
Marten, Neil
Webster, David


Fisher, Nigel
Maude, Angus
Whitelaw, William


Fletcher-Cooke, Charles (Darwen)
Maudling, Rt. Hn. Reginald
Williams, Sir Rolf Dudley (Exeter)


Foster, Sir John
Maxwell-Hyslop, R. J.
Wilson, Geoffrey (Truro)


Fraser,Rt.Hn.Hugh(St'fford &amp; Stone)
Meyer, Sir Anthony
Wise, A. R.


Fraser, Ian (Plymouth, Sutton)
Mills, Peter (Torrington)
Wolrige-Gordon, Patrick


Gammans, Lady
Mills, Stratton (Belfast, N.)
Woodnutt, Mark


Giles, Rear-Admiral Morgan
Miscampbell, Norman
Wylie, N. R.


Gilmour, Sir John (East Fife)
Monro, Hector
Yates, William (The Wrekin)


Glover, Sir Douglas
More, Jasper
Younger, Hn. George


Glyn, Sir Richard
Morrison, Charles (Devizes)



Goodhew, Victor
Mott-Radclyffe, Sir Charles
TELLERS FOR THE AYES:


Grant, Anthony
Munro-Lucas-Tooth, Sir Hugh
Mr. Dudley Smith and




Mr. G. Johnson Smith.




NOES


Abse, Leo
Carter-Jones, Lewis
Edwards, Robert (Bilston)


Albu, Austen
Chapman, Donald
Ensor, David


Allen, Scholefield (Crewe)
Coleman, Donald
Evans, Albert (Islington, S.W.)


Atkinson, Norman
Conlan, Bernard
Evans, Ioan (Birmingham, Yardley)


Bacon, Miss Alice
Corbet, Mrs. Freda
Fletcher, Sir Eric (Islington, E.)


Bagier, Gordon A. T.
Cousins, Rt. Hn. Frank
Fletcher, Ted (Darlington)


Barnett, Joel
Crawshaw, Richard
Fletcher, Raymond (Ilkeston)


Bence, Cyril
Dalyell, Tam
Foley, Maurice


Benn, Rt. Hn. Anthony Wedgwood
Darling, George
Foot, Sir Dingle (Ipswich)


Binns, John
Davies, Harold (Leek)
Foot, Michael (Ebbw Vale)


Bishop, E. S.
Davies, Ifor (Gower)
Ford, Ben


Blackburn, F.
Dell, Edmund
Fraser, Rt. Hn. Tom (Hamilton)


Bottomley, Rt. Hn. Arthur
Dempsey, James
Freeson, Reginald


Bowden, Rt. Hn. H. W. (Leics,S.W.)
Diamond, John
Garrett, W. E.


Brown, Hugh D. (Glasgow, Provan)
Dodds, Norman
Garrow, A.


Buchanan, Richard
Donnelly, Desmond
Ginsburg, David


Butler, Mrs. Joyce (Wood Green)
Driberg, Tom
Gourlay, Harry


Callaghan, Rt. Hn. James
Duffy, Dr. A. E. P.
Greenwood, Rt. Hn. Anthony


Carmichael, Neil
Dunn, James A.
Gregory, Arnold




Griffiths, Will (M'chester, Exchange)
McGuire, Michael
Reynolds, G. W.


Gunter, Rt. Hn. R. J.
McKay, Mrs. Margaret
Roberts, Albert (Normanton)


Hamilton, William (West Fife)
Mackenzie, Gregor (Rutherglen)
Roberts, Goronwy (Caernarvon)


Hannan, William
McLeavy, Frank
Rodgers, William (Stockton)


Harper, Joseph
MacMillan, Malcolm
Ross, Rt. Hn. William


Hazell, Bert
MacPherson, Malcolm
Sheldon, Robert


Holman, Percy
Mahon, Peter (Preston, S.)
Shinwell, Rt. Hn. E.


Howarth, Robert L. (Bolton, E.)
Mallalieu,J.P.W.(Huddersfield,E.)
Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)


Howell, Denis (Small Heath)
Mapp, Charles
Short, Mrs. Renée (W'hampton,N.E.)


Hoy, James
Mayhew, Christopher
Silkin, John (Deptford)


Hughes, Cledwyn (Anglesey)
Mellish, Robert
Skeffington, Arthur


Hughes, Emrys (S. Ayrshire)
Mendelson, J. J.
Slater, Joseph (Sedgfield)


Hunter, Adam (Dunlermline)
Mikardo, Ian
Small, William


Hunter, A. E. (Feltham)
Millan, Bruce
Smith, Ellis (Stoke, S.)


Hynd, H. (Accrington)
Miller, Dr. M. S.
Snow, Julian


Hynd, John (Attercliffe)
Milne, Edward (Blyth)
Soskice, Rt. Hn. Sir Frank


Irving, Sydney (Dartford)
Molloy, William
Strauss, Rt. Hn. G. R. (Vauxhall)


Jay, Rt. Hn. Douglas
Morris, Alfred (Wythenshawe)
Summerskill, Hn. Dr. Shirley


Jeger, George (Goole)
Morris, Charles (Openshaw)
Swain, Thomas


Jeger,Mrs.Lena(H'b'n&amp;St.P'cras,S.)
Newens, Stan
Tinn, James


Jenkins, Hugh (Putney)
Oakes, Gordon
Tuck, Raphael


Jenkins, Rt. Hn. Roy (Stechford)
O'Malley, Brian
Urwin, T. W.


Jones,Rt.Hn.Sir Elwyn(W.Ham,S.)
Oram, Albert E. (E. Ham, S.)
Varley, Eric G.


Jones, J. Idwal (Wrexham)
Orme, Stanley
Wainwright, Edwin


Jones, T. W. (Merioneth)
Oswald, Thomas
Walden, Brian (All Saints)


Kelley, Richard
Padley, Walter
Wallace, George


Kenyon, Clifford
Palmer, Arthur
Weitzman, David


Kerr, Mrs. Anne (R'ter &amp; Chatham)
Pannell, Rt. Hn. Charles
White, Mrs. Eirene


Lawson, George
Pargiter, G. A.
Williams, Alan (Swansea, W.)


Ledger, Ron
Park, Trevor (Derbyshire, S.E.)
Williams, Mrs. Shirley (Hitchin)


Lever, L. M. (Ardwick)
Parker, John
Williams, W. T. (Warrington)


Lewis, Arthur (West Ham, N.)
Parkin, B. T.
Willis, George (Edinburgh, E.)


Lewis, Ron (Carlisle)
Pavitt, Laurence
Winterbottom, R. E.


Lipton, Marcus
Peart, Rt. Hn. Fred
Woodburn, Rt. Hn. A.


Lomas, Kenneth
Pentland, Norman
Woof, Robert


Loughlin, Charles
Popplewell, Ernest
Yates, Victor (Ladywood)


Mabon, Dr. J. Dickson
Prentice, R. E.
Zilliacus, K.


McBride, Neil
Probert, Arthur



McCann, J.
Redhead, Edward
TELLERS FOR THE NOES:


MacDermot, Niall
Rees, Merlyn
Mrs. Slater and Mr. Grey.

Question Proposed, That the Clause stand part of the Bill.

Mr. Graham Page: I do not think that we can leave the Clause without some explanation of subsection (6), which says:
It is hereby declared that sums obtained by way of compensation or damages for any wrong or injury suffered by an individual in his person or in his profession or vocation are not chargeable gains.
What is in question is what that subsection leaves out rather than what it contains. It describes the damages which are exempt from chargeable gains as damages "in his person", which I presume are damages awarded for physical injury, meaning personal injury of that sort. Is it really suggested that they could have been a chargeable gain? Is it suggested that they could be regarded as a disposable asset?

The Chief Secretary to the Treasury (Mr. John Diamond): The Chief Secretary to the Treasury (Mr. John Diamond) indicated dissent.

Mr. Graham Page: The Chief Secretary shakes his head. However, the fact that the subsection is in the Bill in this form raises the question of whether similar damages may be a chargeable

gain. I appreciate that the description in subsection (6) is of those damages which are to be exempt, but the very fact that they are in the Clause as being exempt raises the question whether similar ones are disposable assets and may be a chargeable gain.
For example, are damages for breach of promise a chargeable gain? By the very fact that certain damages are excluded by subsection (6), this might well be so. What about damages for libel and slander? They do not affect the profession or vocation of the taxpayer and so one assumes that they may be a chargeable gain under this provision. Would damages for a breach of contract of services be a chargeable gain?
Why is it only a profession or vocation suggested that they could be regarded which is to be exempt? I know that this as a disposable asset? is Case II of Schedule B where the earnings from a profession or vocation are chargeable, but it seems rather peculiar that it is only a profession or vocation which is exempt. I am sure that extreme anomalies will arise.
There are many cases in which "vocation" has been defined, and in order to understand what the Clause means it is
worth considering what has been held to be a vocation under Case II of Schedule D. It includes the following—the professional bookmaker—but if we are to exempt a bookmaker, shall we exempt a boot maker, a land agent, an adviser to a newspaper on betting, a barrister writing plays in his spare time, an actress, but not a private backer of horses, or a golfing professional in his capacity as a gambler on the result of private golf games, or a film producing executive, and so on? There is an extraordinary distinction between vocation and trade and the same sort of anomalies will be perpetuated by the subsection.
In this Clause it makes nonsense to distinguish between a trade on the one hand and a profession or vocation on the other hand. For example, I wonder whether damages awarded in a fatal accident to the representatives of the deceased person who had been run down in a motor car accident would be a chargeable gain. That is not exempt under the subsection, because they would not be damages to that person but something which his representatives could claim. The very fact that the subsection exempts damages as described in the subsection leads us to believe that unless they are described specifically in the subsection, they may well be a chargeable gain.

Mr. Diamond: Mr. Diamond indicated dissent.

Mr. Page: The Chief Secretary shakes his head, but this is the logical conclusion to be drawn. If the subsection is to apply only to disposable assets, then we must assume that when it refers to a physical injury, it assumes that if a man loses a leg in a motor car accident, he disposes of an asset in doing so and we have to put in the Bill that he will not be charged Capital Gains Tax because he has disposed of that asset, his limb. If that is not the case, why is the provision there at all? If these things described in the subsection do not need to be described in the Bill and might not be chargeable gains at all, why include the subsection? I hope that on reconsideration it can be left out and that we shall not be left with this ambiguity.

Mr. Charles Fletcher-Cooke: These are descriptions of some of the sort of ca uses for the recovery of sums

in the courts. We cannot tell why certain ones have been chosen and others not. Take a petitioner in a divorce case who gets from her former husband, not a periodic sum, but a capital sum perhaps because she does not need a periodic sum but needs a capital sum to buy a house for herself after the divorce. Would that capital sum be obtained by way of compensation or damages for a wrong or injury suffered? I should have thought not. If not, is it an exception under some other rule in the Bill? If not, should it not be an exception?
It would be monstrous if, both the ex-husband and the wife and the court having thought that a capital sum was the right payment to make in certain matrimonial disputes—perhaps £2,000 or £3,000, a once and for all payment, which was suitable to buy a house for the injured wife—that should suffer Capital Gains Tax. It implies that, since it is not specifically described in subsection (6), it would be so.
From the other side of the picture, would the payment of such a sum by the former husband be chargeable upon him if he paid, for example, in the form of a transfer by himself to his former wife £2,000 in securities under an order of the court? Would that be a firm realisable gain? Would he have to pay on that involuntary realisation Capital Gains Tax? Since the Government have put in this subsection, if the Chief Secretary could explain the extent and limitation of involuntary transfers under agreements of the court or under orders approved by the court, we should be satisfied.

Mr. J. Grimond: We had a very important statement from the Chancellor of the Exchequer last night in connection with this Clause. Since then we have had some time to consider his statement, and have also had remarkable events taking place on the Stock Exchange. I should like to make two points.
First, as I indicated last night, on considering this further I do not think that the Chancellor's suggestions will meet the case of those who would maintain that they bought Government stocks expecting to have them paid in full on redemption date and who feel that the tax is a breach


of contract. I am not arguing whether they are right or wrong, but some people have maintained that, and the Chancellor of the Exchequer indicated that he thought that there was something in that argument.
I cannot believe that that argument is met by having this new neutral zone between the issue price and the redemption price. The people caught by the Capital Gains Tax, because they are outside that zone, will feel aggrieved, but, further, we have seen today very remarkable movements on the Stock Exchange between stocks of essentially the same nature. This may add very much to the feeling of injustice.
The point which I wish to ask the Government about is this. As I understand it, the main argument for the concession was that it would make the gilt-edged market easier to manage. The Chancellor said that he was aware of the difficulties which there had been in this market and that, at any rate, part of the reason for this concession was that it might improve confidence in the market. We do not yet have HANSARD for the later part of yesterday's proceedings, but I think that he said that this would be a firm and decisive decision and would give great benefit to the gilt-edged market. One result which I know is that the gilt-edged market had completely to suspend operations this morning. This may be a temporary matter, and I fully appreciate that there may be arguments for it. I should like the Chief Secretary to tell us whether he feels that this concession has achieved its object, whether he now feels happier about the gilt-edged market and whether he thinks that this morning's unhappy events are likely to have any serious effect on sterling.
9.30 p.m.
My feeling is that whatever cause might be attributed to it, it cannot improve the confidence of people who are looking at this country from outside to see that after a statement by the Chancellor, designed to increase confidence, the Stock Exchange had to suspend dealings in Government securities, a thing which, I am told, has never happened before. We should not part with the Clause without hearing the Govern-

ment's further thoughts on this matter, both as to the position of the individual holders, some of whom, I appreciate, have concessions but many of whom will not feel that they have a concession which is relevant to what they regard as their grievance and as to this morning's events and the success or otherwise of the Government's policy in restoring confidence to the gilt-edged market.

Mr. Nigel Birch: I should like to add one or two words to what the Leader of the Liberal Party has just said.

The Temporary Chairman (Mr. James McInnes): Order. I called Mr. Box.

Mr. Donald Box: I am sorry, Mr. McInnes, that the similarity between the names caused the error. The right hon. Member for Orkney and Shetland (Mr. Grimond) has referred to the great state of confusion that occurred in the London market this morning. It is fair to say that that was hardly comparable with the state of confusion which was apparent on the Treasury Bench at the time of the announcement and the reception which it received last night.
If the late Hugh Dalton goes down in history as the Chancellor who rigged his own market and whose epitaph will inevitably be "2½per cent. Treasury bonds issued at 100, now standing at 38½", the Chancellor of the Exchequer will be remembered as the man who brought the gilt-edged market to a grinding standstill, something which, I understand, as others of my hon. Friends have said, not even Hitler achieved during the war. To suspend dealings in the gilt-edged market, which is reputed to have a daily turnover of £50 million, is a damning indictment of the utter incompetence of the Chancellor in handling this matter.
We all realise the motives behind the Chancellor's decision. It was not a question of playing fair with investors. It was not even a matter of reflective integrity to heal an apparent breach of faith on the part of the Government. It must be stated clearly that this decision on the part of the Chancellor was one of pure expediency. Here we had the right hon. Gentleman faced with a discredited and crumbling gilt-edged market. Let us face it, he capitulated to the pressure of informed opinion because he had to do


something to restore the confidence which he had destroyed in recent weeks.
Having made the decision, one would have thought that it was easy enough to carry out the intention. But no. Almost at midnight last night, long after the provincial editions of the London papers had gone to press and been dispatched, long after the time when most financial editors were safely tucked up in bed, the Chancellor made a long and involved statement which was complicated and difficult to understand.
Before deciding whether the Clause should stand part of the Bill, the Committee is entitled to know who was primarily responsible for this tortuous scheme. Obviously, it was somebody with a very devious mind. It is quite inconceivable that the Chancellor of the Exchequer should have acted on his own initiative in this matter.
When I intervened during his statement last night, he told me in reply to my question that the scheme had not been specifically approved by the Government Broker. What we ought to be told is whether the Government Broker specifically disapproved of the right hon. Gentleman's speech. Was he even consulted, and if not, why not? After all, he is a man with 30 years' experience in the gilt-edged market. He is an absolute professional, at the top of his profession, and yet many of my hon. Friends and I understood the Chancellor to say last night that the Government Broker did not thoroughly approve of his speech.

Mr. Diamond: I only intervene on a point of accuracy. My right hon. Friend did not say that. I know that the hon. Gentleman is not able to quote from HANSARD, because we have not got HANSARD with us. My right hon. Friend did not say that, and he made it clear, as the hon. Gentleman, and everyone knows, that he himself was the responsible person, and that he took responsibility for his decisions.

Mr. Box: That is all very well, but I asked the Chancellor a specific question. I asked for a specific assurance that the scheme which he was putting before the Committee had the unqualified approval of the Government Broker. Unless I am going a little crazy with these late hours—and maybe I am—I came to the conclusion, as did many of my hon.

Friends, that the right hon. Gentleman refused utterly to commit himself to whether the Government Broker approved or not. He went on to say that he had often been criticised for taking too much expert opinion. I suggest that this is one case where he might well have benefited from a little expert and experienced opinion.
I think the third possibility is that this scheme was the brainchild of someone at the Treasury, and the name of "Mr. You-know-Who" immediately comes to mind. I wonder whether, in the next few days, we are going to see in a student magazine an article by "Mr. You-know-Who's" daughter entitled, "Daddy makes a nonsense of it again".

Mr. Ellis Smith: That is typical of the hon. Gentleman's attack on the miners.

Mr. Box: I had not mentioned anyone by name.
I think that before we decide whether the Clause should stand part of the Bill, we ought to have answers to this question, answers which ought to restore confidence to the gilt-edged market, because if we do not receive those answers, and we do not restore confidence in the gilt-edged market, I fear that the Chancellor may bring off Labour's great autumn double—a crisis in the £ abroad, and demoralisation of the gilt-edged market at home.

Mr. Peter Hordern: I must declare a personal interest, in that I am a member of the London Stock Exchange. I went about my business this morning and entered the market at about 11.15 with the words of the Chancellor still ringing in my ears, that we had to vote on the Amendment late last night because it was essential to have an orderly market in the gilt-edged section of the Stock Exchange the following morning. As the Committee knows, the gilt-edged market opens at ten o'clock. I had one or two constituency matters to attend to first, so I was not there until about 11.15 a.m. To my astonishment, it simply was not possible to negotiate any dealings in the gilt-edged market.

Sir Frederic Bennett: The Leader of the Liberal Party said that he could not recall an occasion on which a


similar suspension of dealings in gilt-edged stocks had occurred in the past. I have found that there was such an occurrence in 1931. Can my hon. Friend tell me whether his researches have been more effective, and there were other occasions?

Mr. Hordern: I am grateful to my hon. Friend. There was not very much else to do at that time, because no dealings were going on, so I made inquiries about that. My inquiries led to certain answers, and they produced a result. My hon. Friend is quite right. In 1931, there was a suspension of dealings on the gilt-edged market for one and a half hours, on the occasion when 5 per cent. War Loan was changed to 3½ per cent. War Loan. On further inquiry, I discovered that dealings had been suspended also on the outbreak of the First World War, but before that, so far as I was able to ascertain, no suspension in dealings had occurred since 1815, during the critical time of the Battle of Waterloo.
I do not know whether it is the Government's intention to celebrate the 150th anniversary of Waterloo. All I can say is that they are going about it in the most remarkable way. I do not wish to dwell too much on the consternation that existed in the Stock Exchange for more than is necessary. The Chancellor last night dwelt for some time on the considerable concession that he had made. I agree that it is a considerable concession in respect of certain Government stocks. What is so extraordinary is that the Chancellor does not appear to have grasped the fact that it is not possible to make concessions in certain Government stocks without applying concessions all over the field.
This underlines what has been demonstrated throughout our discussions, namely, the extraordinary ignorance of the Chancellor and his advisers in the Treasury. I cannot believe that he could possibly have called for intelligent advice which could have produced a result like this. I want to give a short factual example to show that this is true. Yesterday morning it would have been quite possible for any investor to have put down an order to invest in either one of two classes of security, both of which were precisely similar at that time. The

first was British Transport 3 per cent. stock, 1968–73, and the second was British Electricity 3 per cent. stock, 1968–73.
There was absolutely no distinction between the offered price in the market. It was 77⅞. The market is not large in either of these stocks and the buyer could have instructed his broker to buy whichever was easier to buy. It might have occurred to the broker to buy British Electricity 3 per cent., 1968–73. All I can say is that when he woke up this morning with the Chancellor's words ringing in his ears he would have discovered that he bought the wrong stock. Had he bought the British Transport stock he would have had 22⅛ points clear appreciation, absolutely tax-free.
I do not want to dwell on the quality of the advice which the Chancellor has accepted, but it is very unfair to holders of other securities, whether or not they are Government securities, and it is particularly unfair to holders of Corporation and Commonwealth stocks. What kind of consultation could have taken place? There are several holders of Cheltenham 3 per cent. stock, 1971, Essex 3½ per cent. stock, 1972 and L.C.C. 3½ per cent. stock, 1968–73. If those holders were to be advised properly all those holders would sell their holdings and invest in British Transport stock.
It seems not only unjust that the market should have been split in this way, but, also, that some stock should have been specially selected for favour and other stocks should not have. Just because the Government are not responsible for the redemption of these Corporation and Commonwealth stocks they feel they can bring in quite different terms for some stocks and not for others.
What staggers me is the absolute ineptitude of the advice. Taking into account the kind of discussions that we have had on discretionary trusts and so forth, and the fact that we have heard that these are to be broken up and revalued every 10 years, any sensible trustee's advice would be to dispose of those trusts if it were possible and to invest in this absolutely tax-free haven. I cannot understand what could have persuaded the Government to bring about these circumstances. I am sure that one or


two of the hon. Members opposite particularly cannot be very happy about there being an absolutely tax-free haven in some gilt-edged stock but not in others.
9.45 p.m.
I wish to take up one point. In making some sort of defence for these suggestions the Chancellor said that the gilt-edged market would not suffer much because it was after all managed on institutional funds. He adduced in defence of this that the banks were supporting the short end of the market and that pension funds controlled the long end of the market. I think that he said that these were the most important influences. He also said that it was quite unnecessary to give the life companies any particular concession because they did not represent a significant proportion of the market. If these are not his exact words, the right hon Gentleman said something very similar.
I cannot imagine where the Chancellor gets this kind of advice. What does he imagine he is saying about the pension fund having a larger slice of the long end of the market? It is utter rubbish. I do not wish to bore the Committee—[HON. MEMBERS: "Go on."]—but if one takes figures for the life funds—there are figures in the White Paper, Cmnd. 827, and in the Radcliffe Committee's Report in 1959; the proportions would remain the same though the figures may differ—at that lime, the figures amounted in all to £4,000 million for life funds and £1,116 million which was invested in gilt-edged. We discover that in the long end of the market what pension funds had in British Government securities was £570 million.
To what was the Chancellor referring when he said that switching was not necessarily affected by these methods? I do not believe that the Chancellor appreciates how the market works. He said that it would not affect switching, life companies having to pay tax which otherwise they would not have to pay. The right hon. Gentleman is talking nonsense.
I wish to come to one other point that I consider demonstrates the whole rationale—if it may be described as such—of the Government's proposals. We have been inclined to forget what is the rate of tax because we have been so concerned about the gilt-edged securities We forget that the rate is 30 per cent.
As I am sure the Committee will recognise, it will have a considerable effect on the turnover of the gilt-edged market. How was a rate of 30 per cent. arrived at? The Financial Secretary, for whom I have a considerable personal regard, adduced these reasons. He said that, first, we must bear in mind the highest rate of Surtax on an investment income of over £15,000. A man with that income is taxed at 91¼ per cent. That is one criterion on which we assess what is the rate. I do not know who this man is with a £15,000 investment income. I suggest that he must be someone like "Bertie Wooster".
The second criterion was that we must see to it that there was not any particular tax avoidance by those people who indulged in bond washing and dividend stripping. How many people does he imagine indulge in those kind of operations? They must be characters like "Moses Maggot", and on those two mythical characters, "Wooster" and "Maggot", we are to have an extra rate of tax which, I suggest, would have a considerable effect on the turnover in the gilt-edged market. It would seem to be believed that people are tumbling over themselves to lend money to the Government. The reverse is true. In these circumstances, the Government are the supplicants. People are not longing to invest in Government securities. The Government must wake up to how the market works and to the true position of things.
It is important to establish why the rate has been set at 30 per cent. The Financial Secretary went on to say that it would not have any effect on a switching. He referred to the situation in America and said that the amount of switching in Wall Street in proportion to the value of outstanding issues was greater than the amount which went on in London, despite the fact that the Americans had a Capital Gains Tax. The point is that the number of outstanding issues in New York is much smaller than the amount in London but that the value of securities in New York is about three times as large as in London. It is not surprising, therefore, that we get these figures for switching. So the hon. and learned Gentleman's comments did not prove anything.
What sort of investigations have the Government made about the turnover in


the gilt-edged market concerning switching? My information—and I mention this without any great sense of reliability—is that 60 per cent. to 70 per cent. of all dealings in the gilt-edged market are concerned with switching operations. I hope, on a later Amendment, to have an opportunity to again refer to switching.
It is absolute nonsense to say that the gilt-edged market will not be affected in connection with life companies and that the rate of 30 per cent. will have no bearing on the market. One cannot help but feel that the Government have come to Parliament with a totally preconceived idea of what the Capital Gains Tax should involve and the amount it should be in respect of everything to which it will apply.
The whole of our discussion on the Capital Gains Tax makes one think that the Government have spent the last 13 years wandering in the wilderness like one of the lost tribes of Israel, struggling on their way and getting ideas from we know not where. Mr. Kaldor seems rather like the Cheltenham colonel when one considers the sort of advice given to the Committee by the Treasury spokesmen. When are the Government going to take notice of the valuable advice that is available to them; for example, the advice available from the Bank of England? I cannot believe that the Capital Gains Tax in general, and the Clause in particular, could possibly have been based on any advice given to the Government by the Bank of England. I suggest that if hon. and right hon. Gentlemen opposite listened more to those who know a little more about the market and less to some of the abstract ideas which come from goodness knows where, the country would be better off.

Mr. Bessell: It may not have occurred to hon. Members that the Parliamentary draftsmen certainly have a sense of humour. While this part of the Bill is headed "Exemption and reliefs", having sat through virtually the whole of the debate on the Clause I have discovered that the only reliefs which are likely to exist are for people with the good fortune to win on the football pools.
It is obvious, from the discussion and the way the Clause is worded, that the

Government have not taken note of the real needs of the agriculture industry, particularly in the way it will be affected by the Capital Gains Tax. I will not exaggerate the situation by saying that the effects will be disastrous, but I am certainly saying that the Clause will have a very depressing effect on the industry, particularly on the small farmer.
We have seen that the victims of compulsory purchase orders, of whom there are many, will receive no relief or assistance from the Government. We saw in the discussion on an Amendment which I moved earlier that the Capital Gains Tax is full of the most glaring inconsistencies. In that discussion the hon. Member for South Ayrshire (Mr. Emrys Hughes) referred to Cornwall as an irrelevant part of the country. My constituents do not forget remarks of that sort. We have also seen the effect of all this on the gilt-edged market; how it has been, if not disastrous, then certainly very grave.
If the Clause is allowed to stand part without amendment the Government will have had one remarkable achievement. They will have shown to the possessor of property that a new mathematical principle is in operation—that one and one will no longer make two, but one and a half.

Mr. Diamond: I think that perhaps it would be convenient if I were to reply, first, to the more detailed points raised by one or two hon. Members about certain of the subsections in this Clause and then deal fairly fully with the criticisms regarding my right hon. Friend the Chancellor's proposals in relation to gilt-edged.
The hon. Member for Crosby (Mr. Graham Page) asked many questions relating to subsection (6). As he knows very well, this is in declaratory form and it is put in to help. There is always an argument that if anything is put in a declaratory form, everything has not been put in and that something may have been left out. The purpose of it is to make clear what ought to be clear without anything in the subsection. I am sure that the hon. Gentleman realises that the essence of it is as described here, that damages for any wrong or injury suffered are not chargeable gains and, indeed, could not be chargeable gains.
Several hon. Gentlemen asked me questions about marital matters, but there is no reason to go into all the things that cannot be capital gains. There is a definition of assets which do become chargeable assets and are, therefore, subject to the Capital Gains Tax; there is no need to list everything.

Sir Kenneth Pickthorn: May I ask in what sense is this declaratory? Is it in the sense that such was the law before the Bill was drafted, when all the surrounding conditions were quite different?

Mr. Diamond: No. It relates to the law as it will be if the Bill becomes an Act of Parliament. It is declaratory in the sense that although the Bill makes perfectly clear which are and which are not capital gains, in order to remove any posssible doubt certain things are stated not to be chargeable gains, as they might otherwise have caused a slight measure of doubt.

Mr. Graham Page: The right hon. Gentleman has not dealt with the point, that it specifically says:
… compensation for damages for any wrong or injury suffered by an individual in his person or in his profession or vocation …
We know perfectly well that under Schedule D the words normally used are "trade, profession or vocation" and the very exclusion of the word "trade" leads one to believe that a compensation or damages for any wrong to a man's trade will be a chargeable gain.

Mr. Diamond: There is no need to go as far as this. We are not incorporating all the Income Tax terms in the Bill. I have already said this is in declaratory form to deal with matters on which there might be a possibility of doubt. It does not attempt to include all of those things which are to be excluded. What is there are the things that are to be charged but there are one or two items about which hon. Members might have reasonable doubt, so it is declared there that they are not chargeable.
10.0 p.m.
If I may, I will go straight to the criticisms raised by the Leader of the Liberal Party and two hon. Members who

have spoken, not for the first time, in relation to this matter. Perhaps I can, first, report what has happened on the gilt-edged market and then come a little more to the argument. The jobbers on the gilt-edged market took the view until about half-past twelve this morning that it was right for them to delay dealings until they had adjusted all their prices, having regard to the specific statement made yesterday by the Chancellor of the Exchequer. They stopped dealing, very understandably, until they had had time to mark all their prices, having regard to the important and relevant statement may by my right hon. Friend yesterday, and we would expect them to take a reasonable time to do this. That is all that happened.
As a result, prices started to be quoted having regard to what the Chancellor of the Exchequer said, and this is why—and we took the best possible advice on this—we had to reach a clear, specific conclusion last night so that the market could start to deal. As soon as the market got the detailed statement from my right hon. Friend, the jobbers started to recalculate their prices. That is all that happened.

Mr. Hordern: rose—

Mr. Diamond: I hope that the hon. Gentleman will allow me to describe the position on the market, and I will gladly give way to him later.
Dealings have been quite heavy since the market opened, and I can quote a selection of prices today as compared with yesterday in six or seven stocks. We have 6 per cent. Conversion Stock 1972—closing price yesterday, 98⅝, today, 991/16 British Transport 3 per cent. 1968–73—gone up from 77⅝ to 81; British Electricity 3 per cent., 1968–73—gone up from 78¼ to 78⅞; 3½ per cent. Treasury, 1977–80—gone up from 69½ to 72; 3½ per cent. Treasury 1979–81—gone up from 69⅝ to 71; 4 per cent. funding 1960–90—gone up from 89⅝ to 91½.
Those are all increases that have taken place today as a result of the statement made yesterday by my right hon. Friend— [HON. MEMBERS: "What about War Loan?"] War Loan is an undated stock, and it has gone down from 52⅜ to 51¾ I presume, from the sounds


opposite, that hon. Members are delighted that it has gone down.

Mr. Hordern: The Chief Secretary said that at 12.30 the market started dealing again in Government securities and the turnover was appreciably normal. I appreciate that there is some difficulty, but I happened to be there myself and I know what it was like. The jobbers were making prices of half a point whereas the normal margin is about one-eighth, or possibly a quarter. The size of the market over the whole field was about £50,000, which is very small indeed.

Mr. Diamond: I am sure that the hon. Member will forgive me saying so, but he is one—individual—one broker I think, not a jobber. It is not unreasonable to assume that there is more information available to the Government than one individual has, even if he happens to be a Conservative Member of Parliament.

Mr. Hordern: rose—

Mr. Diamond: I shall give away again in a moment, because I am going to deal with the hon. Member a great deal and I shall give way every time.
The hon. Member is most anxious that the Government should take full and reliable advice and the Government do so, full reliable advice and information, and on that basis I made the statement. I am sorry to tell the hon. Member that his information conflicts with mine, but it is not perhaps inconceivable that those advising me have greater knowledge and more access to information than is available to one hon. Member walking in the Stock Exchange making his own very objective conclusions prior to coming here and making a speech.

Sir D. Glover: The Chief Secretary said a moment ago that this was the reason why last night we had to reach a conclusion. Last night we voted on an Amendment which had nothing to do with the Chancellor's statement. He made a statement on the basis of which he will propose an Amendment on Report, but we did not reach a conclusion on that last night.

Mr. Diamond: I think those who understand Parliament understand that we had to reach a conclusion. [Interrup-

tion.] The right hon. Member for Bexley (Mr. Heath) made the same point last night.

Sir William Robson Brown: I do not want to make any difficulties, but I think that it will help the situation if I ask this question. Was the market suspended at the request of the Government Broker for good reasons? Was he in a position to inform the market when he went there and was it suspended at his request? Otherwise, this situation is very peculiar.

Mr. Diamond: It is not peculiar at all. The Government Broker went there with the full information and the jobbers, naturally, required time to take account of it to make the necessary calculation and to adjust their prices. That is all that happened. One or two details of clarification were further required and were duly given, but until they had all the necessary details it would be quite wrong to start the market going. Otherwise, people would have been dealing on something less than full information. Everyone who has the slightest connection with the Stock Exchange knows that the whole endeavour and purpose of the Stock Exchange Committee is that everyone dealing with it should have full, detailed and accurate information. As soon as this was available and incorporated in the prices, dealings began.

Mr. Hordern: rose—

Mr. Diamond: I do not know whether the hon. Member need interrupt again. I am coming back to him and he will have plenty of opportunity to interrupt.
My right hon. Friend the Chancellor has been criticised for what he has done. He has been criticised by every hon. Member who has spoken in this debate, including the Leader of the Liberal Party, so perhaps it would be right to remind the Committee of what he has done and why he has done it.
What he has done is to honour the pledge which the hon. Member for Horsham (Mr. Hordern) and the hon. Member for Cardiff, North (Mr. Box) both put to him in recent speeches. He having honoured that pledge, both hon. Members sought to tear the Chancellor to bits for having done the very thing they asked him to do. Not satisfied with that, they


said, and quite truthfully, that all they were doing was adducing an argument which they hoped the Chancellor was listening to because they were not interested in honouring the pledge. All they were interested in was that all capital gains on gilt-edged should be totally free from Capital Gains Tax on redemption. They could not produce arguments in favour of that because it would have driven a coach and horses straight through the system of taxation.
What they did was to pretend that here was an argument which they could rely on, an argument to honour the pledge of the Government's contract with the purchaser of the stock. That is the argument they adduced. The Chancellor responded to that argument and, as soon as he responded to the argument, both hon. Members said that the Chancellor should not have done it, that he was utterly stupid, and who advised him?

Mr. Hordern: We say that the so-called concessions made by the Chancellor are half-concessions. They do not apply across the whole of the board. The Chief Secretary is showing a most extraordinary display of ignorance.

Hon. Members: Oh.

Mr. Diamond: I thought the hon. Gentleman wanted to ask me a question, not to make another speech.

Mr. Box: I will not take up at this moment the point which my hon. Friend has made. The Chief Secretary inferred that I did less than justice to the Chancellor when I asked last night whether he had taken expert advice and the advice of the Government Broker. Would the Chief Secretary be good enough to tell the Committee categorically whether the scheme put forward by the Chancellor last night had the unqualified support of the Government Broker?

Mr. Diamond: The hon. Gentleman does himself no good at all by repeating a question. [HON. MEMBERS: "Answer."] He knows that any responsible Minister speaking from this Box, whatever his party, would give the same answer as I have given and which I repeat, that a Minister making a statement at this Box is responsible for what he says and does not attempt to hide behind the skirts of anybody else. It is for that reason that hon. and right hon.

Gentlemen, those of us who are hon. and right hon. Gentlemen in the House of Commons, always refrain from attacking civil servants who are not here to speak for themselves.
The argument advanced—

Sir Lionel Heald: rose—

Mr. Diamond: Perhaps it would be convenient if I replied to the arguments and the debate now that I have dealt with the requests made by the two hon. Gentlemen.
The argument advanced both by the two hon. Gentlemen and by other hon. Members was that a contract, a pledge, was given by the Government of the day that, when a Government stock was issued at a discount, the difference between the issue price and the redemption price was expected to be free of any capital taxation and should therefore continue to be free in that way. Last night, the right hon. Member for Flint, West (Mr. Birch) said that to do what we have done was retrospection in its most odious form. Various other hon. Members had previously said that this pledge must be honoured.
My right hon. Friend was not persuaded that there was any such pledge. Nevertheless, although the previous Government had themselves not honoured this pledge, although, when they introduced the short-term Capital Gains Tax, they never took the view that this was a pledge which bound them—any yield redemption was a chargeable gain for the purpose of that short-term Capital Gains Tax—[Interruption.] Never mind when it was incurred. The question, on a matter of honour is: is this chargeable or is this not chargeable?
10.15 p.m.
Although the previous Government denied the validity of that claim my right hon. Friend took the view that where a matter of honour is in question, and the honour of the British Government is in question, one does not argue—if the argument is one way or the other—one takes the view that one must do the best that can be reasonably expected having regard to the implied pledge. There was no contract of that kind. I have the documents here in front of me. When these bonds are issued there is a sort of prospectus which describes completely


what will happen. If any part of the income is to be tax-free it says so, and there was no question of any such statement being made. It states clearly what is the issue and redemption price on the application form.
It is at that point that it could be thought by those who make the investment that the yield from their point of view is to be drawn from two elements (a) the interest and (b) the capital appreciation up to the date of redemption. As this is the coalesced yield which the purchaser has to have regard to, it might be expected by the purchaser that taxation would remain, by and large, in the same kind of categories as existed, and it might, therefore, be held that it was wrong to impose the Capital Gains Tax on one of the elements that formed part of the yield. It was because of this that my right hon. Friend thought it was the wiser and more honourable course to honour that pledge. Right hon. Gentlemen opposite, including the Leader of the Liberal Party, say that that is not good enough and that what matters is not at what price it was issued but the price which people paid for it.
People pay for it in one or two ways. They either buy through a jobber from another holder who sold at that time or through the jobber, again from the shop, which, instead of being fed by another individual selling, is fed by the Issue Department of the Bank of England. The jobber goes to the department and says, "We have run out of stock and our shelves are dry. Can you let us have more stock?" There is no difference whatsoever either in machinery, practice or effect between stock being bought on tap or stock being bought which is coming through from another holder in the ordinary way. As the right hon. Gentleman partly appreciated or it occurred to him last night, there is no half-way house. One either stops at the point of the pledge—the difference between the issue price and the redemption price—or one has to go the whole way and say that whatever anybody paid for it one deducts that from the redemption yield, and that should be free from Capital Gains Tax.
Why should we relieve from tax every person who makes a capital gain from profit on gilt-edged? What about the

person who holds fixed-interest securities? Is he to be relieved? What about the person who makes a capital gain in any other way? Why should one have to pay and not the other? There is no justification whatsoever for going as far as to say that any person who bought at any time a dated Government stock should have capital gains tax-free up to the point of redemption. Therefore, I am repeating that the only thing that my right hon. Friend could have done was the thing he did, which the previous Government refrained from doing although saying that it was a matter of honour as far as the Government was concerned.

Mr. Box: Does not the hon. Gentleman appreciate that the Bank of England has been able to get a higher price when selling the stock to the public because the public were working on the assumption that they were going to get the redemption profit free of tax? The Bank has in many cases sold at a higher than normal yield level at the time of issue and the only reason why it was able to do that was this tax-free element.

Mr. Diamond: When there is no Capital Gains Tax, people, naturally, do not take into account a Capital Gains Tax in their calculations. But now there is a Capital Gains Tax. It is not retrospective. That is the whole point. The hon. Gentleman has no more knowledge of it than his right hon. Friend had.
We have said time and again that this applies as from Budget day, and any appreciation prior to Budget day does not arise at all. We have gone further and said that, if the stock at the point of purchase prior to Budget day was lower, then we shall give the stock-holder the benefit of that lower price, or, if it were a higher price, he could take whichever he preferred, the earlier price or the price on Budget day. There is no question of retrospection whatever.
I am saying, therefore, that my right hon. Friend, having regard to the pleas made, which we now know were completely insincere, from both the hon. Member for Horsham—

Mr. Hordern: rose—

Mr. Diamond: I shall give way. I have not finished referring to the hon. Gentleman, and he may care to reply to both observations at the same time.
My right hon. Friend, has yielded to the pleas made by hon. Members such as the hon. Member for Horsham and the hon. Member for Cardiff, North, both of whose pleas were totally insincere and totally inconsistent with the speeches they have made this evening, as soon as the request had been granted. Having done that, he has done the right thing and the honourable thing, and I hope, therefore, that we can now get this Clause.

The Deputy-Chairman: Sir Douglas Glover.

Mr. Box: On a point of order, Sir Samuel. The Chief Secretary said that both I and my hon. Friend the Member for Horsham (Mr. Hordern) were insincere in our speeches. We asked him to give way to us before he sat down so that we could have an opportunity to make a point. He has now sat down and you have called another speaker. Is it possible for us to put our points?

The Deputy-Chairman: The hon. Gentleman cannot intervene if the Chief Secretary has sat down. But there is nothing to stop him taking part later in the debate in Committee.

Sir D. Glover: I am not a dealer in the gilt-edged market. I am not a jobber or a broker. I am not a large holder of Government stock. But I know that, by his speech tonight, taken with the Chancellor's statement yesterday, the hon. Gentleman has struck a great blow to confidence among ordinary people in this country. Of course, the institutions and the knowledgeable people do switching operations and so on, but the great bulk of people in Britain who have bought Government stock have always bought that stock on the agreement of the nation to pay the par value on maturity.
The Chief Secretary has said that there is no question of retrospection. The fact remains that literally millions of people in this country, who, perhaps, have £100 of this stock or £500 of that, bought their stocks through their banks, not through brokers, not through jobbers or on the advice of great investment advisers in the belief that, when they were due for redemption, perhaps in

1974 or in 1968, they would get the price marked on the ticket.
The Chief Secretary said that there is no aspect of retrospection. When these people bought the stocks, there was no Capital Gains Tax. They bought them with a sense of confidence in the country and with confidence that the State would acknowledge its obligations. The State has acknowledged its obligations in nearly every stock on maturity by paying £100 on that stock. It paid on maturity. whatever the stocks, even "Daltons", all of which were bought in the blind belief that the State would pay £100 on maturity.
The Government say there is no aspect of retrospection. Yet, because the holders happen to have paid something which, on 6th April, 1965, was 20 per cent. below par, or 30 per cent. or 40 per cent. below par, depending on its time of maturity, then, on maturity, if they want to dispose of that stock, they will have to take 30 per cent. depletion of value between 6th April last and the date of maturity.
The Chief Secretary can make a lot of powerful speeches and I have some sympathy with some of the points he made. But he misses the point that, although there is great activity amongst institutions, a great mass of ordinary people up to now have bought Government stocks, taking the words "gilt-edged" as meaning what they were supposed to mean when I was a boy—that the Government honour their word and pay the full price at maturity. The hon. Gentleman has made no case as to how he can, in all honesty, talk to that great mass of people who will now find that they must pay 30 per cent. on any automatic depletion of value as the stocks come to maturity.

Mr. Heath: This is an important Clause dealing with exemptions and I think that you, Sir Samuel, and your colleagues in the Chair have been generous in enabling the Committee to discuss something which does not appear in the Bill but which was circulated, in an extraordinary proceeding, by roneod document by the Chancellor late last night. I hope that the Committee will now be prepared to bring our discussion on the Clause to a conclusion.
The Chief Secretary has attempted to answer some detailed points, and I do not intend to pursue them any further. I should like to come to the major points raised by the hon. Gentleman. He has accused two of my hon. Friends of insincerity in their arguments. I remind him that in this Committee we are not accustomed to imputing motives or doubting motives of each other in dealing with these matters. It is deplorable that, at this stage of the debate, he should introduce such an element. Those hon. Members who are trying to bring the discussion on this important, long and complex Bill to a conclusion in a reasonable time are not helped by the hon. Gentleman when he adopts this attitude.
My hon. Friends put forward certain arguments for dealing with this matter. If he will pay us the compliment of referring back to the Budget debate or to the Second Reading of this Bill, he will find that we then pointed out the reasons why we think that the gilt-edged market should be excluded from the Capital Gains Tax. One of those major reasons was the interest of the Government in raising money. We have always put forward that argument and therefore the hon. Gentleman was not only improper in saying what he did but also inaccurate in describing the arguments put before the Committee as only those of honour affecting the issue price of Government stock when it was put before the market. So I would say to the Chief Secretary that these are serious matters deserving of more serious argument than he has chosen to give them tonight.
10.30 p.m.
Many of his arguments indeed were specious in the extreme. He said that the short-term Capital Gains Tax applied to the gilt-edged market, but surely he must realise the immense difference the six months' speculative gains tax and its purpose and the long-term tax with which we are dealing at the moment? He made an enormous amount of this sudden upsurge of concern with the honour the Government and the Chancellor. It has taken them seven months to get round to this sudden upsurge of concern for the Government's honour.
In spite of their statement that the tax was going to apply to the gilt-edged

market, despite the protestations which were made, despite the advice given them, in spite of the Budget debate and the debate on Second Reading of this Bill they did nothing until last night. Until then they were not concerned about the honour of the Government. So let us have rather less from the Chief Secretary about this new-found concern for the honour of his own Government or of the money market and Government stocks.
Today's events have confirmed the worst fears which were expressed in this Committee last night. The Chief Secretary dismissed them rather lightly. "Oh," he said, "all that happened was that the dealers decided they would not take any action for a few hours while they sorted the problem out." He dismissed it lightly. The fact that the London gilt-edged market was closed for dealing in Government bonds is an event of the utmost importance, and were it not for the fact that today is Ascension Day, and other bourses in Europe were closed, it would have been an item of the greatest importance for all Europe. That is the plain fact of the case.
It cannot just be lightly dismissed as though the dealers just had a long coffee break and talked the problem over before dealing in Government stocks again. But that was the light-hearted way in which the Chief Secretary dismissed it. What about the Government Broker? He is not a civil servant who cannot be mentioned. Of course he can be. The Chief Secretary is getting rather too keen on telling this Committee we cannot mention or discuss particular people.
The Chief Secretary tried to do it the other night when Dr. Kaldor was mentioned. I have not done so myself, but, of course, hon. Members have, and they are perfectly entitled to do so. He is employed by the Government three and a half days a week and the other three and a half days a week he is a private citizen, delivering lectures in Cambridge University, and, of course, he can be criticised by anybody inside or outside this Committee. He has put his views on record and published them again in two volumes since he has been employed part time by the Government.
What is the position of the Government Broker? Why did it take him an hour and a half to get into the market this


morning? Was he not properly prepared? Is this the way these matters are handled in this new concern with the honour of the Government and their proficiency in dealing with the financial affairs of the country?
What is the explanation? The Chief Secretary completely refuses to give it and lightly dismisses it all with a wave of the hand. All this time the Government brought forward no specific proposals until we brought forward ours in this Committee. The Amendment we put forward was to exempt these stocks, and we put it forward in a group of Amendments taken together. What happened last night, as was indicated by some Members of the Committee, was to introduce into the gilt market what the Financial Times described as "an element of irrationality".
That is what the Chancellor has done—suddenly completely to alter the relationship between Government stocks. He just gave selected items. What my hon. Friend wanted to bring out was the complete picture of the relationship between the different stocks in the gilt-edged market. What the Chancellor did by his announcement last night was suddenly to change the relationship between them. This is what the Chief Secretary has demonstrated by his figures. They shocked some of his hon. Friends, including the hon. Member for Ebbw Vale (Mr. Michael Foot), because of the large gains, going up to £4 5s. for a stock in some cases.
That is not the way to handle the gilt-edged market. Sudden changes of this kind in the gilt-edged market are what every Chancellor, every Governor of the Bank of England and every Government Broker wants to avoid. This is the result of the Chancellor's action last night. If he had taken the action we suggested, the relationship would have remained almost exactly the same and there would not have been the sudden change that we saw today, with its consequences. This is one of our main reasons for criticising the Chancellor's action.
The second reason is the general method of handling the matter. If the Chief Secretary says that the Government have received the best advice, we are bound to accept his statement, and

we have done so. But this does not alter the fact that tonight the market was still confused, and will obviously remain confused for some time. Today's events are really the culmination of seven months of mishandling of our financial affairs by right hon. and hon. Gentlemen opposite. That is what we have had today, and the rest of the world knows it. The consequences of this are very great.
I can understand hon. Gentlemen opposite. They look hurt. They sat there last night when this was put before the Committee. When it was not received with a great shout of welcome and open arms they looked hurt. Then they began to look puzzled. They felt that they had made a great concession to the Committee. The Chief Secretary has argued that this must be important—because this is the principle which the Government have laid down for the Capital Gains Tax and now they have made a tremendous concession. We argued that certain consequences would follow as a result of the concession. They do follow. That is why we tabled the Amendment in the form in which we did. They always follow. That is why I strongly object to the Chief Secretary accusing hon. Members on this side of the Committee of insincerity. We have always said that these consequences would follow.
This is the problem which the Chancellor has created for himself by introducing the Capital Gains Tax in this form, improperly, in an enormous Bill for which he has not had proper time for preparation or discussion. That is now the situation in which Ministers find themselves—hurt, puzzled, exhausted and demoralised. They cannot complain that they were not warned.
The final thing is the most important of all, and it is this. The Chief Secretary is following the example of the Chancellor last night in saying that he must have certainty and that he got certainty as a result of the Division on our Amendment. Of course he has not got certainty. He is deluding himself. The Chief Secretary is deluding himself if he thinks that he has certainty. He has not even got anything on the Notice Paper. He does not know what Amendment will be put forward, or what the Committee


will do about it. He does not know what pressures will be brought to bear on him by public opinion for discussion and action on these matters before Report.
The really important question is that, having, as my hon. Friend the Member for Scarborough and Whitby (Sir A. Spearman) said last night, now taken up this posture by this new position, will the Chancellor be able to stand there? In many ways this is now a much greater question than if he had merely rejected that overture and stayed on his original position. This is the case now. This is the big question which has now to be dealt with. There is no point in trying to baulk it. It is there, and everybody knows it, as a result of what the Chan-

cellor did last night. That is why the Chancellor must now discuss this with his colleagues and get the best advice.
I hope that the Committee will now be prepared to bring this to a conclusion, knowing and recognising that when the Report stage comes we then have a further major debate upon this because of the immense importance of the issue and the action which the Chancellor has to take. Not until the Bill passes both Houses of Parliament will there be certainty on which the gilt-edged market can rest.
Question put and agreed to.
Clause ordered to stand part of the Bill.

Clause 27.—(LIFE ASSURANCE AND DEFERRED ANNUITIES.)

Mr. Diamond: I beg to move Amendment No. 182, in page 29, line 9, to leave out from the first "person" to the end of line 10.

The Deputy-Chairman (Sir Samuel Storey): With this Amendment the Committee can discuss Amendment No. 44, in page 29, line 9, to leave out from first "person" to end of Clause and add:
other than a purchased policy as hereinafter defined.
(2) Subject as hereinafter provided no chargeable gain shall accrue whether at the maturity thereof or on disposal of the rights under any such policy of assurance or contract as aforesaid.
(3) This section shall not have effect as respects any purchased policy and for this purpose Purchased policy means one in which or as respects which the beneficial owner thereto shall have acquired his interest by purchase in the open market.

Mr. Diamond: If you please, Sir Samuel. The other Amendments which you have been good enough to say that we may take with Amendment No. 44 are consequential or have a bearing on it.

The Deputy-Chairman: The hon. Gentleman said "The other Amendments." Is he referring to Amendment No. 183, in page 29, line 12, leave out from beginning to "the" in line 28 and insert:
on the disposal of, or of an interest in, the rights under any such policy of assurance or contract except where the person making the disposal is not the original beneficial owner and acquired the rights or interests for a consideration in money or money's worth.
(3) Subject to subsection (2) above",

Amendment No. 184, in line 30, leave out second "the" and insert "a",

Amendment No. 185, in line 36, leave out "actuarial" and insert "market", and Amendment No. 186, in line 38, leave out subsection (5)?

Mr. Diamond: To be frank, Sir Samuel, I did not hear clearly which Amendments you suggested should be discussed at the same time.

The Deputy-Chairman: I said that we could discuss Amendment No. 182 with Amendment No. 44.

Mr. Diamond: I am entirely in your hands, Sir Samuel. Amendments Nos. 183, 184, 185 and 186 go closely together, and if it is convenient to the Committee I think that we would save time if we discussed them together.

The Deputy-Chairman: In view of what the hon. Gentleman says, I think that we should take them together in this debate.

Mr. Diamond: I am grateful, Sir Samuel.
The main purpose of these Amendments is to enlarge the scope of the exemption from Capital Gains Tax for life assurance policies which are already provided for in Clause 27. During his Budget speech my right hon. Friend the Chancellor made it clear that there would be no question of double taxation of the policy-holders' receipts. In an earlier statement in December, 1964, he referred to these as being normal policies. When he said "normal policies", he was referring to those which would be exempt from the scope of the Capital Gains Tax.
It has now become clear that the exemption should be widened somewhat. Because of the definition that has been put on normal policies under the Clause, I think that it was right for my right hon. Friend to put down that provisional definition of policies and to take soundings of the views of the insurance companies and others generally as to the best way in which this matter might be handled, and he has now reached the conclusion that the exemption ought to be given—

10.45 p.m.

The Deputy-Chairman: Order. I hope that right hon. and hon. Members will maintain silence so that I may hear what is being said.

Mr. Diamond: My right hon. Friend has taken the view, as these Amendments show, that the exemption should be widened to such an extent that every life policy holder and holder of a deferred annuity should be free from Capital Gains Tax, provided he was the original holder, or provided that he had not bought the policy or the contract of annuity, that is to say, if it was a gift, the exemption would still apply.
That is the basis of these Amendments, and I hope that this widening of the exemption will find approval in the Committee.

Mr. Peter Walker: I rather admired the gentle way in which the Chief Secretary came to the Dispatch Box, hesitated over his brief, and then made almost a virtue of having drafted a very bad Clause. To say that the Chancellor tentatively put forward this definition to see whether there was any reaction, and what advice he would receive, and then decide to alter it, is the most remarkable thing that we have heard in this Committee today.
What happened was that the Chancellor put down a Clause, but left out many life policies. If the Chancellor's pledge of 8th December meant anything, it meant that the Treasury would draw up a Clause to cover the millions of life assurance policies, and to cover such things as group life policies on employees. There are millions of such policy holders in this country, and it is incredible that the Chief Secretary should now say that they did not include such people, but waited to be advised whether they should be included.
The fact is that on 8th December the Chancellor made a pledge about life policies and the maturity value of life policies not coming under Capital Gains Tax. He then had some months in which to prepare the Bill, but he decided not to take advice as to what policies should be included. Instead of taking advice on how to word the Clause, he decided to put in a general Clause and wait for advice thereafter.
What happened? The Bill was published, and to the amazement of everybody it did not cover employers taking out policies on their employees. It did not cover policies on dependants other than wife and child. It did not cover the many thousands of policies on partners in businesses throughout the country. In fact, it was estimated that about 4 million people were not covered by the Clause.
The moment this was spotted, did the Chancellor issue a statement saying that he had put the Clause in the Bill in

order to receive the reaction of the life assurance companies? Not at all. He saw the Life Offices Association. He referred it to the Inland Revenue. A meeting took place with the Revenue. Following that, was there any statement to the effect that all these people would be covered? Not at all. The Life Offices Association was so distressed at the fact that it did not appear to be making much progress that it called a Press conference and announced to the country that 4 million policy holders would not benefit by this Clause.
That took place on 12th May, and it was not until the next day that the Treasury announced—this having been on the front pages of all the newspapers—that in fact it was going to pay some attention and do something about this Clause. But even then we did not see the Amendment. It was prior to that date, fortunately due to the attention of the Opposition, that an Amendment was put in to cover this position, and we had to wait a considerable time before the Government got round to remedying the thoroughly bad original drafting of this Clause. But the Chief Secretary comes here this evening and tells the Committee that they really drew up a bad Clause in order that they could obtain general comments upon it, and include everybody—a tentative Clause. The trouble with this Bill is that we have 90 tentative Clauses.
Our only hope is that all the remaining Clauses are as tentative as this Clause was, for certainly if the hon. Gentleman would take a little more notice of advice upon the other Clauses and change them in the same way as he has changed this Clause, it would be a far better Bill. But, alas, all the other advice he has so far ignored, and I suggest that he would probably have ignored this advice if it were not for the fact that the front page of every newspaper carried the story that 4 million policy holders would not benefit. Do not let us believe that, as a result of this particular Amendment and this Clause, the life policy holders are doing rather well as a result of the Capital Gains Tax. It should be known, of course, that even after this Amendment the life assurance companies will be paying Capital Gains Tax on all of their investments, and therefore the policy holders will be


at a disadvantage as a result of the application of the Capital Gains Tax.
Let us also be aware that the individual policy holder may be at something more of a disadvantage than most, because doing his investing through his life policy by means of paying his premium, the Capital Gains Tax will be paid by the life assurance companies at the full rate of 40 per cent. Therefore, instead of an individual paying either 30 per cent. on the capital gains, or less than 30 per cent. if he takes advantage of the two-thirds option, an individual will probably be put at a disadvantage because his premiums are being invested through the life companies, who will be paying the full rate of Capital Gains Tax. The sadness is that the Government have not decided, in the interests of the millions of policy holders throughout this country, to apply a special rate of Capital Gains Tax to the insurance companies, in the same way as they apply a special rate of Income Tax to the insurance companies.
The fact is that the policy holders are mainly people of low incomes, who would not even pay the 30 per cent. Capital Gains Tax, but through the investments in their life policies they will be paying far more. So, although the Government have reluctantly followed, once again, the lead of the Opposition, although the Government have amended a thoroughly badly drafted Clause, I should not like it to go out from this Committee that this means that they have been in any way benevolent to policy holders. They have been thoroughly mean, and policy holders will suffer as a result of their action.

Amendment agreed to.

Further Amendments made: In line 12, leave out from beginning to "the" in line 28 and insert:
on the disposal of, or of an interest in, the rights under any such policy of assurance or contract except where the person making the disposal is not the original beneficial owner and acquired the rights or interests for a consideration in money or money's worth.
(3) Subject to subsection (2) above".

In line 30, leave out second "the" and insert "a".

In line 36, leave out "actuarial" and insert "market".

In line 38, leave out subsection (5).—[Mr. Diamond.]

Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Peter Walker: My only question at this stage concerns the position of policies used in connection with mortgages. The Chief Secretary will be aware that many life policies are used for the purpose of repaying mortgages. I believe that, as the Clause is now worded, after a mortgage is foreclosed, and the proceeds of the policy become the right of the people who provided the mortgage in that way, there is a possibility that it would be treated as a purchase policy. If the hon. Gentleman does not know the answer I trust that he will look into the matter between now and Report and, if necessary, then move an appropriate Amendment.

Mr. Diamond: I am completely seized of the point of the hon. Gentleman's question. I will make absolutely sure of the answer. My tentative view, and I am not a lawyer, is that the hon. Gentleman need have no anxiety. The provision is deliberately drawn to deal only with a purchase. I will make absolutely sure and, if necessary, deal with the matter on Report.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 28.—(PRIVATE RESIDENCES.)

Amendment made: In page 29, line 41, after "or", to insert "of".—[Mr. MacDermot.]

Amendment agreed to.

Mr. Chapman: I beg to move Amendment No. 111, in page 30, line 20, at the end to insert:
or except for any time during which he has been unable to occupy the residence by reason of the terms and conditions of his employment".
The simple effect of the Amendment, if it does the job I hope it does—and I shall be grateful for the legal advice of my hon. and learned Friend—is to exempt from Capital Gains Tax any house which is owned by someone who, for a period, is unable to occupy it because of the terms and conditions of his employment.

Mr. MacDermot: On a point of order. Is it possible and convenient to the Committee to discuss this Amendment together with the next Amendment which is selected, as they both raise similar questions?

11.0 p.m.

The Deputy-Chairman: I did not indicate that when the hon. and learned Gentleman formally moved his Amendment, but we are taking with this Amendments Nos. 498 and 499.

Mr. Chapman: I was saying that this is a simple Amendment, and I will be brief in moving it. The main residence of a citizen of this country is to be exempt from Capital Gains Tax, but what is to happen in the case of people who, owing to their employment, are for a period not able to occupy their main residence? As I understand the Clause, they would then become liable to the tax on their house by reason of their not actually living in it for some period of time.
One example came to my notice in my own constituency, as a result of which I carried out some research into the Bill. The example involves a man and wife who are the resident foster parents in a children's home. They have had to leave their own home and take up a purely residential job in a children's home in my constituency. They have retained their main home and are letting their own residence for the time being. They wish to retain their main home because their job may not last for ever and they may wish to move back into their own home after a period of employment. Or the may like to retain the home for their retirement and to move from their present residential accommodation when the time arrives.
I notice that similar points are covered by other Amendmentes, namely, the position of people with jobs abroad who retain their home in this country ready to come back to on ceasing their employment or for occupation on retirement. I hope that hon. Gentlemen opposite will support my Amendment instead of their own, because mine is of much wider application and certainly includes their own.
Many people in such a position as I have described are anxious to retain

their residence for a further reason. They know that in view of the present continual rise in house prices they will do better to buy a house now and hold on to it ready for their retirement or for use when they cease employment, rather than to wait perhaps five or 10 years before they purchase a house, by which time house prices will have risen to a very high level. At present, house prices are rising by about 10 per cent. per annum. Therefore, they are inclined to buy houses and to retain them in anticipation of retirement, whereas on other grounds they might be willing to sell them now and buy something later.
My hon. and learned Friend may say that this tax will arise only if, in the interim, and before their retirement, they decide to sell their house. That is true in that the tax is paid only if they actually dispose of the property. They may wish to dispose of the property. For example, they may hold their house for a time and then decide, for personal or even business reasons, that they need to move to a different area when they leave their present residential employment. After ceasing to be foster parents in a children's home in one town, they may find a job in a different town, away from their former residence. They may need to sell that residence and buy another in the locality of their new employment. That might be a sale which is equivalent to the main residence exception in the Bill.
Alternatively, when the time for retirement comes they may decide not to retire back to their original house but to seek a house in a seaside town, such as Brighton, or some other pleasant residential area. When they are doing that swop from their original residence to their place of final retirement, it is rather hard that they should be caught by the Capital Gains Tax on what is, in fact, their original and their main residence.
I do not think that the case is at all complicated. It is a very just case. I hope that my hon. and learned Friend will express some sympathy with it and will tell us, if he cannot accept the Amendment, how he can meet the point.

Mr. Grimond: I wish, briefly, to support the Amendment. There are many people who, from the nature of their employment, live in what are generally


called lied houses, and in particular I have received representations from ministers of religion. But there are many in a similar situation.
I appreciate that perhaps this is not a point of very wide application, because the Clause is of benefit only to people who want to dispose of the house. Nevertheless, if the Amendment were accepted we should bring within the range of the exception a valuable class of people who, through no fault of their own, are unable to live in the house which they have acquired for their old age. If they had to dispose of it, perhaps through misfortune, they would be exempt from Capital Gains Tax, if the Amendment were accepted, just as if they had lived in it.
This seems to me to be a reasonable proposition. I do not think that it will have a very wide application because it will apply only to people who have a house other than the house in which, by reason of their occupation, they are bound to live; if they want to dispose of it; and if they come within the ambit of the Bill.
I should at any rate like the Financial Secretary to give some consideration to the point. If there are strong reasons against accepting the Amendment, no doubt he will tell us what they are. Most of the people from whom I have received representations are a worthy class of people, and if we can help them I, personally, shall be grateful.

Mr. Michael Alison: May I refer to the Amendment standing in the names of my right hon. Friend the Member for Mitcham (Mr. R. Carr) and myself? Perhaps I should begin by congratulating the hon. Member for Birmingham, Northfield (Mr. Chapman) on his Amendment, on the manner in which he moved it and the very sensible things which he said about it. I hope that he will excuse me if I step aside from the offer which he made to us to support his Amendment and invite the Committee instead to accept the Amendment standing in the names of my right hon. Friend and myself, for the simple reason that I believe that that Amendment battens on a principle which is embodied in the Bill. This may assist us in persuading the Government to accept it.
It seems to me that the Bill as drafted contains both a humanitarian and a logical principle, both of which we are seeking to extend in our Amendment. The humanitarian principle is very simple: it recognises that one can still consider the house to be one's home even when one is absent from it for quite substantial periods of time.
It recognises the principle that one might describe in the hackneyed phrase "Home is the place where your heart is"—but not necessarily where your body is. It recognises this principle by specific provision for people who have to be away for quite substantial periods of time, three years in the case of the provision contained in subsection (4), on page 30. This period specifically recognises that a person can still consider a residence to be his home although he may be absent from it for that period of time.
The Clause defines a house which is to be exempt from the Capital Gains Tax as that place which is an individual's only or main residence throughout a period of ownership. It goes on to include this apparently rather striking paradox, that the only or main residence throughout a period of ownership can include a very considerable period of absence. Subsection (4) in page 30, line 30, states
If there was a period not exceeding three years…
and later at line 35
… and both before and after that period of three years … there was a time when the dwelling-house was the individual's only or main residence.
I think that the Financial Secretary will be struck by an interesting point of drafting here, namely that there is no specific reference to the length of time, either before or after this stipulated period of three years during which the individual must have been in residence in the said house.
To take as an example a span of ownership of five years, broken into one year of residence in the house, three years of absence and a further year in residence. If the total is computed and absence allocated as a percentage of the period of ownership it will be found that the individual has been absent for the greater part of the time of ownership, in this case 60 per cent.
There is no reason why there should not be an almost unlimited period of absence in respect of the total period of ownership. A person could have been absent for 99·9 per cent. of the period of ownership and still be "resident" according to the terms of this Bill. This is of some significance. The Amendment which we seek to move makes provision for somebody who is absent for a greater period of time than those three years. It may be 5, 10 or 15 years, but it might still be that the period of time for which he was absent, in relation to the total period of ownership is less than in the case of the first example given.
Logically, there is an irresistible case for suggesting that any period of ownership in which a proportionately smaller period of residence occurs than that provided in the Bill would naturally be eligible here. This is rather theoretical and I will deal with the practical implications of it and why we think it is important.
If this Amendment is accepted it ensures that although the period of absence within the period of ownership may be greater than the three years provided in these cases, when people do want to retain ownership and title to a house and expect to come back to it, they may do so. This applies to persons in professional circumstances who leave houses to serve overseas, in particular for extensive periods. I have in mind such categories of persons as missionaries and those in the Overseas Civil Service. These represent quite substantial numbers. I think there are at least 15,000 members of the Overseas Civil Service and I can say, on fairly general authority, that the number of British missionaries abroad at this time amounts to 5,000.
11.15 p.m.
The Church Missionary Society tells me that the average period of service overseas is 15 years. There may be in some societies, particularly the rather poorer ones, difficulty in bringing home missionaries more often than once in five years. Many instances will occur in which either civil servants, missionaries or someone in this category will go abroad for 8, 10 or 15 years leaving behind a mother or elderly father in a house which they wish to retain and to which they

wish to return after an extensive period abroad.
It seems an unfair penalty that, in order not to be forced to pay Capital Gains Tax should they one day wish to dispose of this house many years later, they should have to sell the house before they go abroad even though they may have strong affection for it and strong, deep roots in it. For this reason, we would urge the Financial Secretary to consider whether he could extend, in the written word as it were, a principle which is implicit in the wording of the Bill as it is.
If a missionary or civil servant owned the house for, say, 20 years, this being the period of ownership—of which five years was spent in residence, 10 years overseas in foreign service of some sort, and a further five years in residence—the total period of residence as a proportion of the period of ownership, that is to say, 50 per cent., would be a greater proportion than the case I cited at the beginning, of the person who was resident for a year on either side of the stipulated three years. Perhaps the Financial Secretary will take this logical point into consideration and give us the concession for those who stay abroad longer.

Mr. MacDermot: The Government are grateful to my hon. Friend the Member for Birmingham, Northfield (Mr. Chapman) and the right hon. Gentleman the Member for Mitcham (Mr. R. Carr) for the Amendments they have put down on this matter, because they raise questions upon which we have received many representations, representations which we have thought about carefully. We think that this is a case where the Bill does require amendment and we are very glad to have the opportunity of receiving the views of the Committee upon these matters.
My hon. Friend the Member for Northfield is proposing that people unable to occupy a house which they own by reason of the terms and conditions of their employment should, nevertheless, have the benefit of the concession. The right hon. Member for Mitcham wishes that to apply in cases where their vocation causes them to pass a substantial and consecutive portion of their life overseas.
I would stress that this concession for the owner-occupier is a very important


and substantial concession in the Bill. It is an example, I think, of the favouring in our tax system which we have, on both sides of the Committee, provided for the owner-occupier. It was a matter which was commented upon in another context in the Milner Holland Report. It is another example of how we have made home ownership a more attractive investment in many ways than other things. In this respect, and in connection with this concession, I would stress that what we have proposed in the Bill is much more generous than exists under the United States Capital Gains Tax law, because there the exemption only extends to the extent that the capital gain which may be realised on the disposal of a house is reinvested in another house.
The reasons for our exemption are to encourage home ownership, to avoid any feeling of resentment there might be—and I think that it would be widespread if this was subject to tax—and, also, from a social point of view, to assist greater mobility, which is an important matter from a labour point of view. The effect of it, as I say, is to make home ownership very attractive from the investment point of view. I think that there was an article in a Sunday newspaper recently which described owner-occupation as the "bluest chip" of all.
In so far as we want to use this concession to promote mobility of labour it may he questioned whether, in a sense, my hon. Friend's Amendment, goes far enough, because it is restricted to cases where it is a determined condition of employment that a person should reside elsewhere, but one can imagine cases where a person has a home in one part of the country, and might—I am thinking in terms of technologists, managerial people, and the like—have a job in another part of the country for a number of years, intending and wanting to return to his own home: and where there are strong arguments why he should be able still to benefit from the concession, even if it is not a term and condition of his employment that he shall live in a particular tied house.
As the right hon. Member for Mitcham has said, there is already a provision in the Bill to meet the case of temporary absence up to a period of three years. Naturally, in drafting that provision, we had in mind that this is

intended to be a concession in favour of true home ownership, and not to provide a loophole by means of which people can live in a house for a few years and then, in effect, turn it into an investment without any intention to return and live there again. For that reason, we have the apportionment provision for absence of more than three years, to apportion the time between when the person lives in the house and when he uses it for investment.
There are many people who are in a position in which they would buy a house intending it to be their home, but who, for various reasons, have to live and work elsewhere. They want to keep on the ownership of the house, intending to return to it later, either during their working life or, perhaps, on retirement. We have had representations, particularly, from the Foreign Service, from people in the Armed Forces, from people whose business would take them to serve abroad. It does not only apply to those going abroad, but to those who live temporarily in other parts of the country—executives, technologists, public servants.
We wondered what was the right way to solve the problem. One could extend the three-year period to a longer period—five years, seven years, or whatever number of years it might be. The difficulty is that, whatever the period chosen, one would find examples of deserving people who would fall outside that period. The alternative approach, and it is the one which, if the Committee agrees, we favour, is to start at the other end, and say that those who can establish that a house really is, in the true sense, their home, but who have genuine reasons concerned with their occupation and work for living elsewhere for a period, even an extended period, should still be entitled to the benefit of the concession.
We must obviously put on some restrictions to see that this concession does not become subject to abuse, and open a wide door to evasion. Clearly, one has to require that there shall be a minimum period of occupation. I do not think that we could accept an extension of this concession to cases where the ownership of the property was a pure investment, even if it was an investment intended to accumulate and safeguard funds that could later be used to buy another property.
I do not know what period would appeal to the Committee. It seems to me that something like a two-year or three-year minimum period of occupation would be a reasonable and essential requirement. Obviously, also, the person claiming the concession must not have another residence within the United Kingdom which would similarly qualify for exemption. It may be that other qualifications will commend themselves to hon. Members, but we feel that a solution on these lines can be worked out. We should like to give further thought to the subject in the light of hon. Members' observations, and it may be helpful that I should indicate that at the outset of our discussion.

Mr. Graham Page: In any reconsideration of that Clause, I wonder whether the Financial Secretary will consider this point. The provision of the Clause—the incidence of the tax—if I understand it correctly, depends on the length of the period of absence from the house. If an owner-occupier is sent overseas for a definite period of 12 months and is able to let his house for that period, and if certain legislation now passing through the House reaches the Statute Book, if the rateable value of the house does not exceed £400 in London or £200 elsewhere, the tenant taking it will be a regulated tenant. The owner-occupier will have no right to get back his occupation of those premises. This may be a serious point.
I ask the Financial Secretary to bear that in mind when reconsidering the Clause, because the owner-occupier may, unfortunately, be unable to reoccupy his premises for a period of time.

Mr. Robert Carr: I intervene briefly, principally to thank the Financial Secretary for considering the point made by my hon. Friend the Member for Barkston Ash (Mr. Alison). I think that it is important and I am sure that the Minister for Overseas Development would agree that this is important and that we should make it as easy as possible for British people to serve overseas, particularly in the developing countries. Therefore, I think that this Clause should be reconsidered.
I ask the Financial Secretary in his reconsideration to think carefully of this

point. While I realise, on the one hand, the substance of what he said about having to have a minimum period of occupation, I ask him to reflect on it carefully and, even if he does consider it necessary, to keep that period to a minimum. Let us take an example. A man leaves Britain for a period of service overseas and, shall we say, he is living in Scotland. He serves his period overseas and when he comes back to Britain he may have to find re-employment here. Not finding suitable reemployment in Scotland, he may have to take it in a completely different part of that country.
It may so happen that he bought his house in Scotland only a year before going overseas and if, on returning there, four or five years later, in order to get a proper job in Britain he has to live in the Midlands or the South, he may genuinely have to sell his house in Scotland. To exclude that man from any benefit on the ground that he has not lived in that house for three years would be a hardship. I ask the Financial Secretary to keep that in mind.

Sir Edward Brown: I am glad to be able to intervene in this debate, particularly to support the Amendment. I think that by the admission of the Financial Secretary this is a very sick Clause in a very sick Bill of which we are by now all sick. The Chancellor is sick of it and the country is sick of it.
This Amendment has been moved and, as it were, technically accepted by the Financial Secretary as a shot of penicillin into an economy that is already being poisoned by Socialism. I want to remind the Financial Secretary about what has been said about civil servants not being able to speak for themselves. I want to speak for my civil servants in Bath.
11.30 p.m.
Many of my constituents are perplexed by the Clause as it stands. As civil servants, they are bound by a contract in which terms as to mobility are included. This brings me to the point about which the Financial Secretary expressed some sympathy. Formerly, they were able, when they left this country, to let their houses on lease or with a gentleman's agreement which ensured that the premises would be given up when they returned.


Now, we have the Protection from Eviction Act, which precludes my constituents from getting their homes back when they return.

The Chairman: Order. I do not in any way question the rightness of the hon. Gentleman's observations, but he must relate them to the Amendment. All he says may or may not be true, but it has nothing to do with the Amendment. We are discussing capital gains.

Sir En Brown: I accept your Ruling, Dr. King. It seems clear to me that some of these people will have to sell their properties and, under the Clause as drafted, chargeable capital gains will arise through no fault of theirs. Many hundreds of my constituents, civil servants on the Navy side of the Government service, will face this sort of situation.
The Chief Secretary assured us earlier that the best possible advice had been given t o the Government, but the Financial Secretary told us that he had been under a great deal of pressure from other quarters. I suspect that it came from organisations representing my constituents and people similarly placed throughout the country. Civil servants should be regarded as in a special category in this respect. I have been asked to press their claim, which I have done, and I hope that the Amendment or the Financial Secretary's offer will lead to a change of policy and a fairer Clause.

Mr. Chapman: I am very grateful for what my hon. and learned Friend said. I hope that he will reconsider the minimum residential qualification which he proposes to put in any new Amendment in place of mine. A qualification of that kind will be very hard on people who, while abroad, buy a house here in anticipation of their return and who, perhaps, never occupy it before their final return to the United Kingdom. In other cases, the minimum residential qualification could be very tough because, no matter what period my hon. and learned Friend fixes, there will be hard cases on the wrong side of the line.
It would be much better to say that, so long as it is the main residence and intended as such, the exception shall stand, not subject to any minimum residence period. Otherwise, we shall have untold difficulties. I am sure that my

hon. and learned Friend will be sympathetic on the point, and we shall have another occasion to discuss it. I am most grateful for what he said, and I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

The Chairman: For the guidance of younger hon. Members—I saw one attempting to rise and speak—may I say that, if an hon. Member seeks leave to withdraw an Amendment, it is still possible for any other hon. Member to object.

Amendment made: In page 31, line 15, after "two", insert "or more".—[Mr. MacDermot.]

Mr. MacDermot: I beg to move Amendment No. 142, in page 31, line 16. at the end to insert "for any period".

The Chairman: It would be for the convenience of the Committee if the next Amendment, No. 143, was discussed at the same time, in page 31, line 19, leave out from beginning to "or" in line 21 and insert "beginning of that period".

Mr. MacDermot: These two Amendments are very little more than drafting matters. Under subsection (7) there is no provision for the case of a man who has one house and does not need to make any option but who later buys another house and then wishes to opt to treat the other as his principal residence. The effect of this Amendment is to keep open the option so that he can exercise a choice within two years from the time when he acquires the second house.

Amendment agreed to.

Further Amendments made: In page 31, line 27, after "above", insert "the question".

In page 31, line 38, leave out "nomination" and insert "notice".—[Mr. MacDermot.]

Mr. John Hall: I beg to move Amendment No. 232, in page 32, line 21, at the end to insert:
(10) This section shall also apply in relation to a gain accruing to an individual on a disposal of, or an interest in,—

(a) dwelling house or part of a dwelling house which is or has at any time during the period of his ownership been the only or main residence of a dependent relative of his, or
(b) land which he has for the occupation and enjoyment of the dependent relative


with that residence as its garden or grounds up to an area (inclusive of the site of the dwelling house) of one acre

as it would apply if neither the individual nor the wife or husband of the individual occupied any other residence and the occupation of his dependent relative had been his occupation.
In this subsection "dependent relative", means a relative of the individual or of the wife or husband of the individual who is incapacitated by old age or infirmity from maintaining himself, or the widowed mother, whether incapacitated or not, of the individual or of the wife or husband of the individual.
I shall be very brief in describing this matter to the Committee. It has been agreed in principle that the owner-occupied house shall be excluded from those assets which, on disposal, shall be free of Capital Gains Tax, but it is likely that the claims of such people as overseas civil servants, Service men, missionaries, and ministers of religion—although, it would appear, not Ministers of State—should be specially considered.
We seek, by the Amendment, to extend exemption to a dwelling-house, or part of a dwelling-house, which has been bought for a dependent relative who cannot, for good reasons, live with the family, but who has to be provided for. We have been careful to determine who is a "dependent relative". The Committee will see that it is
a relative of the individual or of the wife or husband of the individual who is incapacitated by old age or infirmity from maintaining himself, or the widowed mother, whether incapacitated or not, of the individual or of the wife or husband of the individual.
We have tried to make quite clear what we have in mind, and it would be unfortunate if, on disposing of a house to rehouse the dependent relative elsewhere, Capital Gains Tax were imposed. That would tend to discourage the movement of old people to more suitable accommodation. I am sure that the Minister must be sympathetic to this idea and I sit down in the confident anticipation that he will give the same consideration to this Amendment as to the last.

Mr. MacDermot: There is a popular fallacy that Treasury Ministers are cold and hard-hearted and never moved by any emotional appeal, and that it is only cold, remorseless logic which will make them shift at all. I would only point out in answering the hon. Member that in this case we do not feel that cold, re-

moreless logic is on his side, but, nevertheless, we are moved by the sympathetic and emotional considerations to support his case.
As a matter of logic there is very little to commend this suggestion, because the person whom it is intended to benefit, namely, the dependent relative, is not the one who would benefit. The greater part of the benefit would undoubtedly inure to the taxpayer who provides the home for the dependent relative, for were the dependent relative for one reason or another to move he would then be free to dispose of the house and realise a capital gain free of tax. I suppose there might be some indirect benefit to the dependent relative because of the added inducement to the taxpayer to provide a home for him in these circumstances. I remember that when we were discussing an earlier Clause on the matter of exemption or otherwise of covenants in favour of aged mothers, terrible pictures were drawn of how dependent mothers and others would be driven to National Assistance as the result of the fact that wealthy taxpayers were deprived of exemption from Surtax.
Be that as it may, I think the Committee will agree that this is a proposal which has an obvious appeal to it, that it is not unreasonable that someone who provides a home for a dependent relative should have some benefit in respect of such property, as he does in respect of a house he occupies himself. We do think we would like to look at the Clause and consider the wording of the Amendment.
I think some limitation needs to be put upon the exemption. At the moment it could apply to any number of other houses. We think that probably it is right that this concession should be extended to only one other house beyond the taxpayer's own home. We would like perhaps to write a limitation of that kind into it. I do not want to commit myself to saying there are no other limitations, but this is the only one I have in mind at the moment.
If the hon. Member would agree to withdraw the Amendment I would undertake to bring forward an Amendment on Report to give effect to the proposal.

Mr. John Hall: The Minister is quite right in saying that this case is not based upon logic, because it is perhaps the kind of logic which Tweedledee, I think it was, explained to Alice,
if it was so, it might be; and if it were so it would be: but as it isn't, it ain't. That's logic.
I thank the Financial Secretary for his reply, and upon the assurance he has given I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question proposed, That the Clause, as amended, stand part of the Bill.

Mr. Geoffrey Hirst: I take one second to ask a question which I have have not been able to put on the Amendments we have considered. This Clause applies to a gain accruing on disposal of a dwelling-house and up to an acre of garden or other ground required for the "reasonable enjoyment" of the house. I want to ask one question. It would have arisen on an Amendment which was not called and which of course I cannot now discuss. Does a garage come within the meaning of the definition in the Clause? I do not want to take up any time elaborating the question or the argument for it. I am sure that the Financial Secretary will understand it, and I should be grateful to know what the answer to the question is.

11.45 p.m.

Mr. MacDermot: I am not sure whether the hon. Gentleman's question is extending to a garage which is separated from the main residence. I guess that that is what he has in mind. Obviously, a garage which is within the curtilage of his own home would be included. I had better be cautious because I have no assistance in this matter. I think that as the Bill is drafted it would not be possible for a separated garage which was quite a separate property to be included. But I should like to consider the point to see whether there is a feasible way in which the provision could be extended. Obviously, there are cases where people have a garage which is 100 yards or so from the house, and if there is a simple way of including that within the Clause, it would seem reasonable to do so.

Question put and agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 29.—(CHATTELS SOLD FOR £1,000 OR LESS.)

Mr. Ramsden: I beg to move Amendment No. 203, in page 33, line 4, to leave out "one" and to insert "five".
The Amendment seeks to raise the exemption limit on chattels from the current figure of £1,000 to £5,000. As in our previous debates, when discussing chattels we shall no doubt be thinking principally of works of art. The Government have proposed a limit of £1,000 below which transactions shall not raise a claim for Capital Gains Tax. My hon. Friends and I have sought in previous discussions to exempt chattels altogether, but that has been rejected, and the Government's case in urging the rejection of our proposal has been that chattels must be in the Bill because everything else is and it would be unfair and breach their comprehensive principle to leave chattels out. The Amendment would not in any way breach that principle.
Early on Tuesday morning in a discussion of the difficulties which would arise in the administration of the tax on chattels—problems of valuation, preventing tax evasion and so on—the Financial Secretary said:
I concede that difficulties arise in this respect, but we do not consider that they are so great as to outweigh what we think would be the objections in principle to the complete exclusion of chattels from charge.
I accept for the moment the Financial Secretary's argument about the difficulties of total exclusion, but I think he will accept that there have been shown to be in our previous debates difficulties about the administration of the tax. Our case is that we should do everything possible to minimise the difficulties by narrowing down so far as is reasonable the field over which the tax will operate. Surely that would be a gain to the Bill.
The Solicitor-General may say that to do so would be to make the exemptions too numerous. The Financial Secretary said on Tuesday morning:
As everybody knows, very substantial capital gains are made on some chattels. If … people were to hear and read of these gains being made and find that they are exempt from all charge, it would tend to bring the


whole tax into disrepute."—[OFFICIAL REPORT. 25th May, 1965; Vol. 713, c. 467.]
For the purposes of this argument, although I do not agree with that sentiment, I would even accept that. I think that the Government will concede that on gains of this size arising from transactions below the £5,000 limit there will not be many of the kind that will get publicity in the papers or upset people who learn of them with a sense of their unfairness. I should have thought that the order of gain in the charge below £5,000 will in practice be very little different from that which is below the £1,000 limit.
If the Government will accept this Amendment they will help to extricate Treasury Ministers from the dilemma in which they find themselves at the moment. The jam that they seem to be in is this. On the one hand, they say, "We cannot exempt chattels altogether, or a great many people will say that what we are doing is unfair." On the other hand, they are stuck with a tax which, even on their own admission, will raise very considerable difficulties in administration. I think that those in the Committee who have attended our previous debates on this matter will admit that the case made on this side of the Committee, in particular by my hon. Friend the Member for the Isle of Thanet (Mr. Rees-Davies), about the difficulties of valuation, of administration and of preventing evasion, was extremely strong and made an impression on both sides of the Committee. They will, I think, also agree that the case was not convincingly answered by the Government.
We are, therefore, asking the Government to help themselves by simplifying the administration of this tax, which they can do without breaching in any way their own principle of comprehensiveness. If it is the Government's intention to maintain this tax they will be forced by sheer experience of the difficulties that they will encounter to do something themselves on the lines of this Amendment. It will save a great deal of trouble if it can be done at once.
I could elaborate, but I will refrain from going over arguments that have been expounded already. I think the Financial Secretary accepts that they are serious. He said that there was a valuation problem. It is a big problem. There are

a large number of transactions involved which will be subject to the administration of this tax—something like 2,000 a year going through the auction rooms of Christie's and Sotheby's alone, to mention but two. I hope that the Financial Secretary will think hard about this, and that he will give us this Amendment as being a reasonable and practicable concession which in the end will be to the Government's benefit.

The Chairman: With this Amendment we are taking Amendment No. 204, in page 33, line 8, leave out "one" and insert "five", and Amendment No. 205, in line 10, leave out "one" and insert "five", both of which raise the question of £1,000 and £5,000, an issue which we discussed on an earlier Clause.

Sir C. Mott-Radclyffe: I support what my right hon. Friend the Member for Harrogate (Mr. Ramsden) has said. When the Minister replies I hope that he will pay attention to this point. Throughout our earlier debates on the question of chattels he has consistently underestimated the problem of valuation. He has consistently taken the line that it is rather analogous to valuation for Estate Duty. But there is no analogy there at all. The valuation for Estate Duty follows a fairly well-known practice, when a man's assets are valued on his death. Valuation for chattels over £1,000 on sale, in relation to what they might have been worth on Budget day, is a totally different problem of enormous complexity.
With a population of 52 or 53 million there are not sufficient trained qualified valuers to undertake this task. More than 50 per cent. of all the transactions that took place at Sotheby's last year were over £1,000. How do the Government think that this will be administered in practice? Has every item which is entered into a sale in any auction to have a certificate sent in by the vendor describing how he acquired it?
Has he to say whether he acquired it by inheritance or by possession, and if so the date, and if he bought it, what he paid for it? Is every cheque drawn on a bank to be accompanied by a certificate from the person who signs the cheque saying what the cheque is drawn in respect of?
Purely on the administrative side, apart from the policy aspect, it will be impractical to try to apply a Capital Gains Tax to all chattels of say more than £1,000, and the more one thinks about it, the more one is certain about it. The Amendment seeks to extend the limit from £1,000 to £5,000. That, at least, eases the burden a little.
I hope that when the Solicitor-General replies he will deal seriously with this problem, and not in a sort of abstract way on the basis that this is a simple problem of valuation, because he knows that it is not.

Mr. Nicholas Ridley: The figure of £1,000 will be eroded in value if we have continued inflation and I think that we can adduce this as an argument for accepting the Amendment. Surtax was fixed at £2,000 before the war. That sum is now worth £6,500 in terms of present-day money. If the proposed tax had been brought in in 1951 at the £1,000 limit, it would now be worth only £720.
I n view of the ever-lowering value of money, I feel sure that the Solicitor-General will agree that inflation will do further damage to this limit, and that to raise it to £5,000 would help considerably in the future.

The Solicitor-General: The Amendment has been moved and supported in an eminently reasonable manner, but I am sure that the right hon. Member for Harrogate (Mr. Ramsden) will not be disappointed or surprised if I say that the Government cannot accept it.
What it is necessary to consider is what is the object of the exemption up to the figure of £1,000? The object is not to create a class of assets which shall be immune from Capital Gains Tax. That is precisely what we would do if we were to accept the Amendment.
The object is quite different. It is to exempt ordinary household goods and possessions. If we apply that test, there can be nothing objective about it. It must be simply a matter of judgment as to where we put the figure. There can never be a precise figure, whether it is £1,000, £2,000, or £5,000. What we have to ask ourselves is, what do ordinary citizens possess?
The only chattel which the ordinary household possess which is worth more

than £1,000 is a motor car, and motor cars are already expressly exempted by another provision in the Bill. It is very difficult to imagine anything else in the ordinary household—leaving aside people who are very wealthy—which is worth more than £1,000.
If we are dealing with chattels, there is one other way of drawing a line, and that is to be selective, to try to distinguish between one class of chattel and another, and put pictures on one side of the line, and other articles—say sailing boats—on the other.
12 m.
That, I believe, would be a perfectly impossible line to draw. Therefore, the only line we can draw is the sort of line which is drawn in this Clause. We have to fix a particular figure. This matter has been very fully debated already and I do not think the House wants to go over it again, so we invite the Committee to say that, quite clearly, £5,000 is much too high. We should be adding a very special exception in the case of chattels to the principle of a Capital Gains Tax, and we suggest that the figure of £1,000 is eminently reasonable, so we invite the Committee to accept it.

Mr. Fell: May I just ask one or two questions on this? Let us take, for instance, the case of someone who has been left a fine French table of some sort. which for argument's sake is worth £10,000. In that case, the person would pay tax on £9,000. Let us then take the case of someone who is left 10 pieces of silver, each worth £1,000 or just under. Am I right in supposing that if they are sold at separate times none of those would come within the Capital Gains Tax? If that is so, it is absolute rubbish. I asked a question the other evening, and I gave as an example a set of pictures, or a set of something else, which were sold separately, and the answer, so far as I could understand it, was that they would not incur the tax if they were sold separately.
The example I have given this evening is clearer and, as I understand the position, if 10 separate pieces or works of art are sold separately they will not incur this tax. However, if there is one piece and it is sold for the same price as the 10 pieces, it will incur 30 per cent. tax. If this is true, it really must be


Patent and obvious nonsense to everybody. I presume that not even this Government are really going to insist on that. and that they must find some way round this position. I think they will find that the way round it will not be by agglomerating the 10 pieces and charging the tax on all those 10 put together.
Secondly, have the Government consulted the art market of London about this?

Mr. MacDermot: Mr. MacDermot indicated assent.

Mr. Fell: They must have been told that one of the basic reasons why London is the centre of the art world today is that there is no tax, but there is a tax in France and in America. Therefore, in spite of the fact that this Government badly want the money and badly want London to remain the art market, they are going to throw the art market away to Paris by doing this. May I have an answer to my first question, which is important? I cannot believe that the Chancellor of the Exchequer, for whose common sense we all have much admiration, and his hon. Friends, will make that kind of mistake.

Mr. MacDermot: I hope, for the hon. Gentleman's own sake, that on Tuesday night he was sleeping comfortably in his bed when, for many hours, we discussed this and kindred problems. If he can find the time, he should read the report of that debate in HANSARD, in which he will find the answers to the questions he asked, including the fact that I had received two deputations from the London art market and that I compared the tax position of the London art market with the art markets of Paris and New York.
I pointed out in that debate the incentive to the owner of a set of articles to sell them as a set because they command a higher price. If one has 10 articles which, individually, are worth just under £1,000 then, if they are a set, they will fetch considerably more than £10,000 if sold collectively.
The hon. Gentleman now suggests that there is something terribly illogical in the fact that if one has one article worth £10,000 one pays tax if it is sold but that if one has 10 articles worth just under £1,000 each one does not pay tax if they

are sold. That is the effect of any exemption, of any cut-off. Sometimes one has a tapering provision and sometimes a cut-off. Where there is a cutoff this sort of thing must happen; call it an illogicality or an anomaly.
If one fixes a level above which gains on chattels pay tax, this situation will be produced. There is no great question of principle involved in this limit. It is a matter of judgment. Our aim was to find a limit which would include what everyone would regard as normal household chattels. And, taking a generous view, we thought that £1,000 was reasonable. However, we think that £5,000 would be too high.

Mr. Fell: I am grateful for that explanation and I apologise for not having been here on Tuesday night. I assure the Financial Secretary that this provision is not only illogical but grossly unfair. Throughout the evening I have listened to speeches from the Government Front Bench saying that it would be wrong to exempt this, that or the other, that it would be unfair to other people and that things would not be equally taxed.
What we are discussing now is the most unfair form of taxation I have ever heard. It makes the whole thing a nonsense. One man has a table worth £10,000 and another has 10 bits of silver worth £950 each. The first man pays £300 or £400 in tax while the second man pays nothing.

Mr. Maxwell-Hyslop: The question I wish to ask would, I am sure, have appealed to the Solicitor-General's father. I am not sure of the number, but certainly quite a few families in the West Country have had family bibles in their possession for hundreds of years. If they are lucky they will have a Breeches bible. Because of the demand for these bibles in America, they are worth well over £1,000.
I am sure that the Solicitor-General would not wish a family which had had a Breeches bible in its possession for 400 or 500 years to have to sell it to pay the Capital Gains Tax. [Interruption.] I assure hon. Gentlemen opposite that bibles of this sort are extremely valuable. Indeed, a 1599 Geneva version, of which there are a number in the West Country, would fetch a considerable sum indeed.


I cannot think why hon. Gentlemen opposite find this amusing. A family does not have to be wealthy to have a bible of great age. I hope that the Solicitor-General will, if he cannot accept the Amendment, give an assurance to introduce an Amendment on Report to exclude family bibles from the provision. A much easier course for him would be to accept the Amendment. since a Breeches bible nowadays would not fetch more than £5,000.

Sir Hugh Lucas-Tooth: It seems to me that the Clause as at present drafted would catch the case of an artist who was selling a picture which he himself had produced if he was able to sell it for more than £1,000, or indeed this would apply possibly to certain other objects. Surely it would be utterly wrong to charge Capital Gains 'fax when the picture had been produced by their own skill?

Mr. MacDermot: The position would remain exactly as it is now. An artist who produces a picture and then sells it is liable to the Income Tax on it.

Sir H. Lucas-Tooth: It would mean both Income Tax and Capital Gains Tax. I hope that the point will be looked at.

Mr. Bessell: With all the brevity I can command, I would support every word and syllable uttered by the hon. Gentleman the Member for Tiverton (Mr. Maxwell-Hyslop). The point ought to receive sympathetic consideration by the hon. and learned Gentleman the Solicitor-General.

Sir Richard Thompson: I should like to support the Amendment for three main reasons. The first is that which was put forward by my hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe), that there are not enough valuers available in this country to carry out the necessary valuations so as to enable this provision to work. It simply is not "on". At a time of inflation it is absolute nonsense to fix a limit like £1,000, as has been done in the Clause. The hon. and learned Gentle-man the Financial Secretary may think £1,000 meaningful today, but considering the rate at which money is losing value now and at which it will continue to lose value under the policies with which we are now confronted, in a short time it

will be worth next to nothing. It is clearly wrong at such a time to fix a figure of £1,000 as being appropriate to the purpose of this Clause.
We ought not to worry too much, with respect to some of my hon. Friends, about the state of the art market. It has spokesmen who speak very well for it. I am simply trying to say something for the ordinary individual who, having seen what the Government have done for the national credit and what they have done to gilt-edged, seeks to transfer some of his few remaining assets into things rather than into Government securities. These people are not trying to make illicit gains. All they are trying to do is to purchase a little independence and decency for their old age and to pass on to their childreti a little of the fruits of their own industry. Can it be wondered if people at such a time put their money into things which they believe will not lose value, as nearly everything else is losing value?
It is disgraceful that the Government should seek to establish a limit of £1,000 which, before the year is out, will seem illusory in this kind of context. The Government ought not to introduce legislation which is capable of being so utterly set at nought and evaded, and which is incapable of being fairly administered over thousands of citizens every year. This is an absolute invitation to people to get round this provision. I hope that the Government will think again about it and not introduce this utterly unreal limit, which is so wrong and unfair to people who only want to build up a bit of independence for their old age.

The Solicitor-General: I intervene for one moment to answer the question which was put to me by the hon. Gentlemen the Members for Tiverton (Mr. Maxwell-Hyslop), and Bodmin (Mr. Bessell), both of which are constituencies with which I myself have had a long association. They both asked me what would be the position of somebody in the West Country who owns a Breeches bible which has been in the family for many generations and which is worth more than £1,000. My answer would be that if there were a disposition of the bible the only tax which the owner would have to pay would be on the appreciation in value since Budget day. I do not think that that would be a very heavy burden.

12.15 a.m.

Mr. Maxwell-Hyslop: I could not agree less with what the Solicitor-General said. At 4 per cent. a year depreciation of the currency, in 10 years there would be a 40 per cent. increase in the value of such a commodity. Although we know that the Government will not last long, we are going through the form of passing laws which have no terminal date. I should have thought that from amour propre the Solicitor-General would have pretended that the legislation which the Government are pretending to pass would endure for more than a few days. The only interpretation which the Committee can put on his assurance that this is purely a chimerical argument is the certainty in his own mind that the Government will fall very quickly.
If he wants to adopt the pretence that the Government will last the full term for which they were elected, there will be at least a 20 per cent. increase in the value of the bible. He should note the extent to which the American market in rare books is pushing up the price in this country. His reply was an attempt to talk his way out of the point, which will convince nobody.

Amendment negatived.

Amendment made: In page 33, line 23, after "and" insert "(a)".—[Mr. MacDermot.]

Mr. MacDermot: I beg to move Amendment No. 147, in page 33, line 24, after "person" to insert
or
(b) to persons who are acting in concert or who are, in the terms of paragraph 21 of Schedule 7 to this Act, connected persons".
The Amendment follows an Amendment agreed on an earlier Clause.

Amendment agreed to.

Mr. John Hall: I beg to move Amendment No. 193, in page 33, line 24, after "occasions" to insert
always provided such occasions are within a twelve months period and that such assets as come within this subsection are owned at the same moment of time".

The Temporary Chairman (Mr. Grant-Ferris): The Committee may discuss at the same time Amendment No. 197, line 28, to leave out from "section" to the end of line 32.

Mr. Hall: With a desire to help the Government to make progress with the Bill so that at least they may have it before the Summer Recess, I shall be brief. It seems to me that under subsection (4) anyone who had, for example, half a set of china and gave it away—a half-set being worth less than £1,000—and later, at any stage, some years later, was able to find another part of that set, so that the two parts would make a complete set, and gave that away to the same person—or even to another person—might find himself liable to tax.
The Amendment will guard against that possibility. It is possible to give away half a set of chairs or part of a set of prints and some years later to find in an antique shop a matching part of the set. In making that gift some years after the first gift, one might be liable to tax. The Amendment has been drafted to meet the point. I hope that the Amendment is clear to the Financial Secretary and that he will accept it.

The Solicitor-General: This Amendment falls into two parts. The first part,
always provided such occasions are within a twelve months period
the Government are unable to accept. If the 12-month rule was accepted it would produce rather a strange result. A person who owned a set of six articles exceeding £1,000 in value, with each article worth less than £1,000, would be able to get round the rule in Clause 29(4) simply by selling five of the articles within 12 months and selling the sixth after the end of the 12-month period. That would make nonsense of the rule in Clause 29(4).
The second part raises rather different considerations, in proposing that a number of articles should not be treated as part of a set unless they are owned at the same time. That does not present any great difficulty because it never was the intention of the Government that this Clause should operate to treat as one set a series of disposals of individual articles out of a set which was constantly replenished by new acquisitions. We think there is a point of substance here and would like to consider it further. If this is agreeable to the hon. Gentleman we will certainly do so before the Report stage and see if we can meet him on the second half of the Amendment.

Mr. John Hall: On the principle that half a loaf is better than no bread at all, I thank the Minister for his sympathetic approach to this problem and, on his assurances, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause, as amended, ordered to stand part of the Bill.

Clause 30.—(PART III WORKS OF ART, ETC. 1894 c. 30.)

Mr. Ridley: I beg to move Amendment No. 386, in page 34, line 10, at end insert:
(2) A gain shall not be a chargeable gain if accruing, on the disposal of an asset by way of gift to the National Trust for Places of Historic Interest or Natural Beauty or if accruing on a disposal on death of an asset devised or bequeathed by the deceased to the said National Trust.
I believe this to be a non-party Amendment, because I think all hon. Members support the activities of the National Trust. It may not be generally known that the Trust is entirely financed by voluntary subscriptions. It receives no public money at all for its day to day operations. It has great financial problems. The agricultural revolution has required that very large quantities of money be spent on modernising plant and properties, which has put a serious strain upon the resources of the Trust. All this expenditure is met by private subscriptions, by gifts, devises, wills and trusts, and I am sure the Committee would wish to encourage this. The principle of the Amendment has been conceded in all previous legislation.
If a person makes a gift or an endowment to the National Trust, then he is excused Estate Duty on that part which he gives to the Trust. The fact that such endowments are free of duty seems to establish the principle that the State does not wish to tax gifts and devises made to the Trust.
The Trust is grateful to the Government for having supported its coastal appeal to the tune of quarter of a million pounds, which I think shows that the Government are thoroughly in accord with the objects and ambitions of the Trust. I ask the Government to accept that if death duties can be waived on gifts and endowments to the Trust, then any capital gain which might accrue to
such gifts or endowments can equally be waived too.
If the Bill goes through un-amended there will be much less likelihood of people giving money and shares, which might bear Capital Gains Tax, to the Trust or devise it in their wills.
Equally, if they continue to do so, the money will be worth less in the hands of the Trust if it has to pay capital gains on what it receives. For those two good reasons, unless the Amendment is accepted, there is no doubt that the finances of the Trust will suffer to some considerable tune. The Amendment may not be properly drafted, but I am sure we would accept any alternative drafting which the Financial Secretary may he prepared to offer. I commend the Amendment to the Committee as a practical way in which to help a worthy and typically British and successful institution, which I am sure the whole Committee would like to help.

Mr. Robert Cooke: I rise to support my hon. Friend and to echo all his sentiments about the National Trust, whose work should surely be helped in every possible way by Parliament. If this Amendment were passed in its present form it would put the National Trust in a special position. I hope, therefore, if the Financial Secretary is going to look favourably at this Amendment, he will give an undertaking that any other trust trying to perform similar work shall have the same exemption, because it would be wrong to put the National Trust in a special and favoured position. There are a number of private trusts, and there might be others in the future, who are doing equally good work in the same sphere. I hope that the hon. Gentleman will bear that in mind.

Mr. Rafton Pounder: I do not wish to detain the Committee for more than a moment. It is really more a question than anything else that I would like to bring to the notice of the Financial Secretary. It concerns the reference to Section 15 (2) of the Finance Act, 1894. Why is it that this particular Section has been specially selected for reference in this Bill, since it relates only to gifts made to universities and to local authorities? Will it be possible for gifts to the National Trust, and indeed to


charities generally, to be excluded within the framework of that exemption?

Mr. MacDermot: If I could deal with the last point first, because it leads into the main question on this Amendment, this is one of the references made to earlier legislation and the common feature of them all is that these are cases where Parliament has thought it right to grant exemption from Estate Duty. The particular example which the hon. Member has chosen is that of universities and local authorities, but there are others also referred to in the Clause which benefit national collections of one kind and another.
If I may return to the Amendment moved by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), would like to thank him for his gracious reference to the Chancellor's decision to make a grant in support of "Operation Neptune". This is something which I know had a great personal appeal to the Chancellor. Chancellors do not always love spending public money, but I know that on this occasion it gave him great pleasure to be able to make this grant.
The hon. Member, in moving his Amendment, said that he based his case on the parallel of the Estate Duty exemption in favour of the National Trust. This argument my right hon. Friend finds compelling, and he agrees that it is right that a similar concession in favour of the National Trust should extend to the Capital Gains Tax.
If I may express sympathy with the hon. Member as one who tried from time to time when sitting on those benches to draft Amendments, his Amendment in fact does go considerably wider than the scope of the Estate Duty exemption for the National Trust. To make it clear, perhaps I should explain that the exemption is for land given or bequeathed to the Trust indefeasibly and which is vested in the Trust inalienably for the public benefit; secondly, objects ordinarily kept in a building forming part of such land; and thirdly, maintenance funds given for the support of that land. Other bequests or gifts of money—for example, gifts of securities to the Trust—do not enjoy the benefit of the exemption.
12.30 a.m.
What we consider would be right would be to extend the exemption to the same field as the exemption which exists for Estate Duty purposes; amongst other reasons, because, when making such a concession, we think it important that one should, as it were, adhere to precedent and not do something that will lead to very wide pressure for the extension of the concession to other fields.
For that reason, I do not think that I can give much comfort to the hon. Member for Bristol, West (Mr. Robert Cooke), who asked for an assurance that we would extend the concession to other bodies. That is not the intention.

Mr. Ridley: I am grateful to the Financial Secretary for considering the Amendment so favourably. Having sat for many hours in order to urge points to do with the arts and buildings upon the hon. and learned Gentleman, it is a happy thought for me that we end up good friends, and I am delighted that he has accepted the principle of the Amendment.
I should like just to query one thing. The Financial Secretary said that he did not feel that it would be right to extend the concession to securities which might be given to the Trust. I am sure he knows that the Trust never accepts any house, building or other property unless there are also sufficient capital assets to guarantee enough revenue to maintain that property in perpetuity. Many donors do not give land because they may not have the land, or sufficient land to yield enough revenue. It is, therefore, not uncommon for the Trust, when receiving property, to be given a block of shares to produce enough income to maintain the property.
I hope that the hon. and learned Gentleman will look at this point again. It would not be difficult for a would-be donor to switch his securities to buying a piece of land and giving us that land in lieu of giving us the securities, but that would surely be a dodge which the Financial Secretary would not like donors to indulge in. Although I do not ask for an answer now, I feel that in this case we might be able to depart from the Estate Duty precedent, and extend the concession to shares as well as to land and other forms of property. However, with the hon. and learned Gentleman's


assurance, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. MacDermot: I beg to move Amendment No. 148, in page 35, line 45, after "section" to insert "without subsection (8)".
This Amendment has been tabled in order that we may put ourselves straight in relation to the Northern Ireland law. A special provision is required, because Capital Gains Tax exemption is spelled out in terms of the Estate Duty legislation. Estate Duty law in Northern Ireland is quite separate from that in Great Britain. As the law stands, it has the effect of applying subsection (8) to the Northern Ireland Estate Duty, and it would be quite wrong for us to try to do that. The question whether any Capital Gains Tax is payable should be a deduction for the purpose of Estate Duty in Northern Ireland is a matter for the Northern Ireland Parliament to decide. The purpose of this Amendment, therefore, is to exclude the provisions of subsection (8) from operation in relation to Northern Ireland.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

To report Progress and ask leave to sit again.—[Mr. MacDermot.]

Committee report Progress to sit again this day.

Orders of the Day — HOUSING (AMENDMENT) (SCOTLAND) [MONEY]

Resolution reported,
That, for the purposes of any Act of the present Session to increase the limit of the aggregate amount of advances which may be made to the Scottish Special Housing Association under proviso (i) to section 18(1) of the Housing (Scotland) Act 1962, it is expedient to authorise such increases in the sums which may be issued out of the Consolidated Fund, raised by borrowing, or paid or repaid into the Exchequer, or in any sums payable under section 1 or 19 of the said Act of 1962 out of moneys provided by Parliament, as may result from increasing to one hundred and twenty million pounds the limit imposed by the said proviso.

Resolution agreed to.

COMPULSORY PURCHASE ORDER, WESTMORLAND

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Gourlay.]

12.37 a.m.

Mr. Michael Jopling: I am glad to have this opportunity of raising a matter concerning the Westmor-land County Council (Milnthorpe) Compulsory Purchase Order, 1960. This is a matter which gives rise to a serious injustice to one of my constituents. Briefly, the history of the case is that early in 1959 the Westmorland County Council approached the Dallam Tower Estate to purchase land at Birkett's Farm, Milnthorpe, with a view to building a new school there. In May 1959, the estate replied demurring with the request and they suggested that Owlet Ash smallholding, already owned by the county council, should be used instead for this development.
A month later, in June, 1959, the county council replied to the estate and said that this proposed site at Owlet Ash was unsuitable for a school because it was badly placed for Milnthorpe, the levels were difficult, there was bad drainage and there was the possible line of the Milnthorpe bypass that might pass through the estate. The result of this was that in February, 1960, the county council issued a compulsory purchase order to the estate to acquire Birkett's Farm, which was the original proposal.
Subsequent to this a public inquiry was held in June, 1961, and this was followed later in October, 1962, by a second public inquiry, which was held later. I do not think it relevant to the case tonight to refer too closely to the conduct of those two inquiries. There were obviously passions roused, bad temper and ill feeling. It is no concern of mine to become involved with the rights and wrongs of those matters. I am concerned tonight with the Minister's action over the granting of costs to my constituent. The result of the public inquiry over this order was that the inspector did recommend at both inquiries that a compulsory purchase order be not confirmed by the Minister, and on both occasions he said that the Owlet Ash site was the best site in Milnthorpe for the proposed new school.
The inspector, having made this recommendation in both his reports, this was upheld in May, 1963, by the Minister of the day—the Minister of Education—refusing to confirm the order. The fact is that in a short time the building of the new school will begin on the original Owlet Ash site. It was very unfortunate that there were two inquiries. The fact was that the second inquiry was called after the Minister had directed, or suggested, that the county council had not fully considered the planning aspects of the Owlet Ash site. This was a very unfortunate matter for my constituent, because, as I have said, in his original letter to the county council of May, 1959, he had suggested this alternative site, and also before the first hearing he had given notice to the county council that he would suggest at the inquiry that the Owlet Ash site was the best.
This was, in fact, borne out by the inspector, who said in his report later that it was no fault of the owners that the council was insufficiently prepared for the first inquiry. This implies that the inspector was firmly of opinion that it was no fault of my constituent that the costs in which he was involved over the second inquiry should have arisen at all.
I turn now to the matter which is of such importance to me and, I suggest, to the House, the matter of costs. I have made the point about the second inquiry, and I have said that the inspector's report stated quite firmly that the fact of having to have a second inquiry was no fault of my constituent. As regards the question of the costs of the first inquiry, the inspector at the second inquiry recommended that, if the Minister, after receiving the two reports and all the other relevant information on these matters, decided not to confirm the order, the costs of the first inquiry also should be granted to my constituent. The Minister did refuse to confirm the order, but, in September, 1963, he refused to grant costs to my constituent and suggested that he did not think that the council had been unreasonable.
I shall not base my argument about the Minister not granting costs at that stage so much on the evidence and opinions up to that point as on the facts

up to date and the opinions which have come out since, which are of the utmost importance. The decision of the Minister not to grant costs when that course had been recommended by the inspector is surprising. I was not present at the inquiry, and it would be wrong to base my case entirely on that evidence, but I am anxious to pay a great deal of attention to what has been said by other outside independent bodies since the decision was made.
Soon after the Minister refused to grant costs, my constituent referred the case to the Council on Tribunals, an independent body above all suspicion and held in high esteem. As the House knows, the Council on Tribunals has, since that time, reported and suggested that successful objectors in compulsory purchase order cases should be granted their costs automatically. This report was accepted by the previous Government, and, to judge from answers given by the present Government, they also have taken up and accepted that expression of view by the Council. It is clear, therefore, that if the inquiries in this case had been held today, costs would have been granted.
I do not wish the Minister, to whom I am most grateful for being here this evening, to base his answer purely on the point that it would be necessary to make a retrospective decision because of the Report of the Council on Tribunals. I want him to consider the matter in the light of the discretion which he has under the Local Government Act, 1933, under which he could have granted costs at an earlier date. Apart from the evidence of the report of the Council on Tribunals. other strong pressure can be brought to bear. Last December, the council wrote a letter to my constituent about this matter and stated that this was the type of case in which costs should have been awarded. The council said quite clearly that it felt that costs should have been given in this case.
There is further support in the fact that the Council on Tribunals wrote another letter only yesterday to confirm its decision and stating:
There is not much I can add to my letter of 31st December last. In reply to the question in the fourth paragraph of your letter I can say, however, that the Council's view was certainly not based solely on the fact that the objection was successful but resulted from


a very careful consideration of all the circumstance of the case.
The only other circumstance which made the council take this view was that it felt that my constituent was put to unreasonable expense by the way in which these inquiries were conducted; and I think it is very apt to note that, when my constituent did ask for costs at the inquiry, those costs were not in any way resisted by the county council; there was no resistance at either of the inquiries.
I have also had a message from the Country Landowners Association; and I know it may be said that that association may have an axe to grind, but in the type of evidence which they have provided there is no question of any axes being ground. In October, 1963, long before the matter of the Council of Tribunals came up, the association wrote a letter stating that it was difficult to imagine
… when the Minister would award costs to a successful objector when he refuses them in such a case as this, where the successful objector not only suggested the alternative site at an early stage, but was put to unnecessary expense by the conduct of the acquiring authority …
I do not want to get involved in the rights or wrongs of this case, but there has been injustice in that my constituent has not been granted his costs. I believe that the Minister might well say that if he changed his mind on this matter it might bring forward a flood of similar applications, but again, to quote the Country Landowners Association, which comes across many similar cases, this one
is the only one they know about where the Inspector has recommended that costs should be awarded and the Minister has declined to award them".
This is a very serious matter because there has been a basic injustice. If I might be forgiven for saying so, the Ministry of Education has been particularly mean in the matter of withholding costs. The Ministry of Housing and Local Government, on the other hand. has, in connection with inquiries on compulsory purchase orders, given costs on 10 occasions.
Costs alone, however, are not of primary concern to my constituent, although they amount to over £1,000. I do not believe they will begin to cover the

expense which my constituent has been put to on this matter. He is fighting this as a basic right. I believe his action of fighting this and resisting this is well in the manner and the tradition of the Crichel Down affair. He is fighting for a basic right where, I believe, there has been a serious injustice.
The inspector said "Yes" to costs; the Council on Tribunals said "Yes" to costs; but the Minister, so far, has said, "No." I hope that tonight he will consider changing his mind in view of the very important evidence which I have brought forward. This compulsory purchase order was about a place called Birkett's farm. That word "Birkett" in the north-west of England implies memories of the great Lord Birkett, a name standing for justice, and for standing up for one's rights. I hope the Minister tonight will tell us he will look at this matter again and reconsider it, and will understand the justice of the case.

12.52 a.m.

Mr. F. V. Corfield: I want very briefly to support my hon. Friend. I am fully aware that the initial decision was taken by my right hon. Friend, but here is a case, I think, where we have got to look at first what the facts are and secondly, and what is supremely important, what is right. We have here a case in which the inspector has made a recommendation for costs. As I read the report he based that recommendation in part at least on pretty severe criticism of the way in which one of the officers of the county council gave his evidence, and, indeed, on the background history as it revealed the conduct of the county council.
I am very well aware, of course, of the previous policy—previous, I mean, to the adoption of the Council on Tribunals recommendation. The previous policy was always that costs should only be awarded where one of the parties behaved unreasonably, as was apparently the case here. The inspector was the only person who heard the evidence, unless the Minister made other inquiries, which he could not do under the compulsory purchase order rules without making those inquiries available to the other side, so it is difficult to see how he overruled the inspector.
However that may be we have a separate recommendation of the Council on Tribunals and that Council was set up by the previous Government, in the words of Lord Butler at the time, as a watch dog of the interests of the private citizen. I hope—I feel sure they do—that the present Government do accept that Council in that capacity. I very much hope that the Minister will look at this case again. There is the question whether or not the citizen has been fairly treated. It is not a question of apportioning blame to anybody. It is a question whether we have treated the citizen fairly, and it is, after all, the function of the Council on Tribunals to investigate these things, and represent public rights, which, I suggest, the Minister should consider very seriously.
Let us forget about apportioning blame. If in the light of events the decision turns out to be a wrong decision, let the Minister take time to take it back and consider what is right in regard to the private citizen. It looks as though here the county council said, "Here is large landowner", and as a result of not looking at the planning considerations it led to a second inquiry and to the extra expense.

12.55 a.m.

The Joint Under-Secretary of State for Education and Science (Mr. Denis Howell): I appreciate the concern of the hon. Member for Westmorland (Mr. Jopling) in raising the matter, and I am grateful to the hon. Member for Gloucestershire, South (Mr. Corfield) for making it perfectly clear that the matter, except on the question of representations on costs now, has nothing whatever to do with the present Government. It was entirely decided by the right hon. Member for Birmingham, Handsworth (Sir E. Boyle.) and the hon. Member for Lewisham, North (Mr. Chataway) when in office, and, therefore, all the strictures of the hon. Member for Westmorland ought really to be directed to his own right hon. and hon. Friends. But it is part of the business of government that government goes on in spite of elections, and, therefore, I find myself in the unique position of defending the record of right hon. and hon. Gentlemen opposite who are now being criticised.
I must say a word about the accusation that the Department of Education and Science is mean about costs. The hon. Gentleman said that 10 Ministry of Housing and Local Government cases have been awarded costs but none in the Department of Education. In the five years from 1960 to 1964 there were only 12 such cases in the Department of Education, and none, I agree, was awarded costs, but there were 381 cases in the Ministry of Housing. There are about 6,000 housing and planning appeals a year, as the hon. Member for Gloucestershire, South knows, which far outweigh, thank goodness, the numbers that I have to deal with at the moment in the Department of Education. Therefore, there are likely to be more orders for costs in the Ministry of Housing cases.
This is one of the most complex, difficult and rummy businesses that I have ever had to untangle. Although the hon. Member for Westmorland says that he would like to disregard the conduct of the inquiry—I am sure we all would—one cannot do so if one wishes to find out exactly what happened. The inquiry was conducted by the inspector in the first place as to whether the school should be built on the site where the local authority said it should, the farm, or whether it should be on the smallholding, which was the contention of the farmer. Looking at the evidence, it is clear that the inspector got himself bogged down in the first case in asking questions about agricultural policy. He was concerned about smallholdings and, in particular, a technical matter, about full-time smallholders and part-time smallholders. The right hon. Member for Birmingham, Handsworth, rightly said that if the inspector was going to deal with agricultural policy he ought to hear witnesses from the Ministry of Agriculture, and he sent the case back to the inspector for him to do so.
An even odder thing happened at the second inquiry. I agree that, unfortunately, tempers seemed to become a little frayed. But in the middle of the second inquiry the inspector declared that he happened to be a smallholder—and it is clear that he had very strong views about the difference between full-time and part-time smallholders—and he again involved himself in passionate arguments


with witnesses from the Ministry of Agriculture as well as the local authority.
This seems to have been the most peculiar business that I have ever heard about and in that connection I have considerable sympathy with the constituents of the hon. Member for Westmorland, who obviously wondered what was going on—as he rightly said, probably at their expense. At the end of the day the inspector said that for reasons of agricultural policy the balance of advantage lay in building the school not on the farm but at Owlet Ash, the smallholding site. But the Minister absolutely categorically rejected that contention of agricultural advantage. This is very important. The two Ministers—the right hon. Member for Birmingham, Handsworth, and the hon. Member for Lewisham, North—both said that they disagreed that the balance of agricultural advantage was in favour of building the school on the smallholding rather than the farm, and that was certainly the view of the then Minister of Agriculture. But another remarkable thing that happened was that the tenant of the smallholding had died so the Minister decided that he would uphold the appeal, not on the grounds that the inspector had promulgated, on the balance of agricultural advantage, but because fortuitously the owner of the farm was still alive and the owner of the smallholding had died, and the Minister felt it could not possibly cause personal hardship if he agreed to the inspector's recommendation. That is the reason why he did it.
One can see the logic of that in this most illogical situation. Nevertheless the Minister felt that he could not agree in those circumstances to costs being awarded. The hon. Gentleman's constituents, having won the day in this remarkable business, were complaining of delay, although in the end delay was to their advantage because they would not have won the case had the delay not been long enough to take in its compass the unfortunate death of this tenant. But they started to campaign for costs. One can understand them asking for costs. But clearly the right hon. Member for Handsworth decided that they could not have costs because he 110 taken his decision from a most unique and remarkable standpoint.
There is also the question of retrospection. I am happy to confirm, on behalf of my Department and the Ministry of Housing and Local Government, the view which the previous Administration took, that when a person wins such an appeal he should automatically get his costs; it is a view which finds favour with the present Administration. Nevertheless, while one respects the views of the Council on Tribunals, a line has to be drawn somewhere.
There is, in fact, a draft circular about the Government's intentions on costs, which is at the moment being studied by the appropriate authorities and it is proposed to implement it as soon as possible, but provisionally we have to say that the new policy will apply to inquiries that take place after the date when the circular is published. One can see the logic of that when one realises that there are over 6,000 planning appeals in the Ministry of Housing and Local Government every year; 113 in the Ministry of Transport; 50 to 60 in the Ministry of Power; two to three each in the Ministry of Health and the Ministry of Defence; and between two and six in my own Department. There is, therefore, a vast number of these appeals.
Over the last 20 years a lot of people, particularly in the field of housing, have had their appeals upheld and, therefore, whilst I can understand the hon. Gentleman saying, "Do not bother about retrospection", the fact is that one cannot ignore it. If today I were to announce that in this one case we would agree to retrospection, it would cause many people to say, "What about us? If there is going to be any retrospection at all, what about our case?"—a case which may have occurred five. 10 or 15 years ago.
On present considerations, at any rate, the Government do not feel that retrospective payment of these costs is something which they could possibly countenance, because it would create tremendous administrative inconvenience, necessitating searching back into all the cases. That is so especially in this case. I think I have made clear the cogent reasons on which the right hon. Member for Handsworth and the hon. Member for Lewisham. North based their decision in


these very peculiar circumstances; they specifically had regard to costs, but felt that in all the peculiar circumstances of the case they could not award costs.
If the hon. Gentleman wants to see me I will certainly agree to see him. If he has any additional views or evidence that he would like to put before me I will agree to consider them, as well as anything that the Council on Tribunals might like to say about the case. But it is the oddest and most difficult and complex thing that I have ever seen.
I can appreciate the difficulties of the previous Administration, and, agreeable though it would be for me as a Socialist Minister to say that the previous Ministers

were wrong and I shall go back on their decisions, having looked at the thing from scratch, I cannot say that. I shall be glad to discuss the matter with the hon. Gentleman, but I cannot promise to reverse the decision which I have announced to the House.

Mr. Jopling: I am grateful to the hon. Gentleman for his kind offer to look at this again. I shall take the matter up with him and I hope that in the meantime he will bear in mind that in this case there was a specific recommendation that it was unique.

Question put and agreed to.

Adjourned accordingly at six minutes past One o'clock.